|In the first quarter of 2007, SA nominal house prices in the affordable segment (houses of 40m²-79m² and priced at R370 000 or less) as measured by Absa increased by 18,1% year-on-year to about R243 000 on average. In the fourth quarter of 2006, the nominal price rise was 15,7% y/y. In real terms, house price growth in the affordable category came to 11,8% y/y in the first quarter of this year, compared with growth of 9,6% y/y in the final quarter of 2006. |
The current rising trend in the price growth of affordable housing, which commenced in the fourth quarter of 2006, can be ascribed to the strong demand for housing at the lower end of the market causing prices in this segment to increase at a brisk pace.
Nominal house prices in the middle-market segment (houses of 80m²-400m² and priced at up to R2,7 million) increased by an average of 15,5% y/y to about R892 500 in the first quarter of 2007. In real terms, house price growth in this category came to 9,3% y/y in the first quarter. In both nominal and real terms, the year-on-year growth in house prices in the first quarter was up on that of the fourth quarter of 2006, when it was a nominal 14,8% and a real 8,8%. This development came on the back of strong growth in transaction volumes in the first three months of the year after interest rates were left unchanged during this period.
In the three middle-segment categories, house price growth as measured by Absa was as follows in the first quarter of 2007:
* Small houses (80m²-140m²): a nominal 12,6% and a real 6,6% higher.
* Medium houses (141m²-220m²): a nominal 18,4% and a real 12,1% higher.
* Large houses (221m²-400m²): a nominal 16,1% and a real 9,8% higher.
Nominal house prices in this segment (houses valued at between R2,7 million and R9,9 million) increased by an average of 7,6% y/y to around R3,9 million in the first quarter of 2007 (9,6% y/y in the final quarter of 2006). In real terms, house prices in the luxury category increased by1,8% y/y in the first quarter (3,9% y/y in the fourth quarter of last year).
The low growth in house prices at the upper end of the market is related to a strong supply of properties in this market segment during recent years, whereas demand started to taper off in late 2004 because of the high prices caused by strong price growth in 2003 and 2004.
Regional house prices
On a provincial basis, nominal year-on-year growth in house prices in the middle segment of the housing market varied from as low as 5,2% in KwaZulu-Natal to as high as 28,2% in the Northern Cape in the first quarter of 2007.
In the country’s major metropolitan areas, nominal house price growth in the first quarter of the year varied from 9,0% y/y in the Durban/Pinetown area to 26,1% y/y in the central and southern parts of Johannesburg.