Absa – SA house average prices increased by 21,9% in 2005

In 2005, the average price of South African houses in the so-called middle segment of the residential property market (houses of 80m²- 400m² and priced at up to R2,2 million) increased by 21,9% year-on-year (y/y) (32,2% in 2004) to about R700 200 in nominal terms, according to Absa in its Residential Property Prospective First Quarter 2006 released this week in Johannesburg.

In real terms (after adjustment for inflation), house prices increased by 17,9% last year, compared with a growth rate of 30,4% recorded in 2004.

In the fourth quarter of 2005, nominal house prices in the middle segment increased by an average 15,7% y/y to about R733 200. This was the lowest nominal growth in any quarter since the second quarter of 2002, when a growth rate of 14,4% was recorded. In real terms, house price growth came to 11,6% y/y in the final quarter of last year.

In both nominal and real terms the year-on-year growth in house prices, according to the bank, was down on that of the third quarter, when it was respectively 19,7% and 15,2%.

In the three middle-segment categories, house price growth was as follows in 2005:
* Small houses (80m²-140m²): nominal 18,5% and real 14,7% higher.
* Medium houses (141m²-220m²): nominal 23,5% and real 19,5% higher.
* Large houses (221m²-400m²): nominal 24,2% and real 20,1% higher.

The average price of affordable houses (houses of 40m2-79m2 and priced at R193 000 or less) in 2005 increased by 15,1% y/y in nominal terms compared with growth of 19,7% y/y in 2004. In real terms, the bank says, this represents an increase of 11,4% y/y compared with price growth of 18,1% in 2004.

In the final quarter of 2005, nominal house prices in the affordable category increased by 8,6% y/y. The increase in the preceding quarter was 15% y/y. In real terms, house price growth in this category came to 4,7% y/y in the fourth quarter of last year, compared with y/y growth of 10,7% in the third quarter.

House price growth in the affordable market segment continued its downward trend, with both nominal and real year-on-year growth declining further in the fourth quarter of 2005. The affordability of housing probably also had an impact in this market segment during this period.
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