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SA house price growth 15,2% in 2006
Rodney Hayter
10 January 2007
House prices rose by 15,2% in nominal terms in 2006 compared with 22,7% in 2005 and 32,2% in 2004, according to the latest Absa House Price Index released in Johannesburg today.
In December 2006 nominal house price growth of 13,5% year-on-year was recorded in the middle segment of the market, down from a revised growth rate of 14% in November.
This brought the average price of a house in this segment of the market to about R857 400 at the end of last year.
In real terms, Absa reports that a year-on-year growth of 8,2% was recorded in November compared with a revised growth rate of 8,4% in October, based on the headline consumer price index. Average real year-on-year house price growth of 9,7% was recorded in the first eleven months of 2006.
On a month-on-month basis, nominal price growth was slightly down at 0,9% in December after it remained stable at 1,1% between August and November last year. House prices increased by 1,1% month-on-month in real terms in November (0,9% month-on-month in October).
With CPIX inflation on an upward trend since mid-2006 and inflationary pressures still present in the economy, Absa expects interest rates to increase further by a total of 100 basis points in the first half of 2007. This will bring banks’ prime and variable mortgage interest rates to a level of 13,5% by the middle of the year. Against the background of higher inflation and interest rates, real economic growth for 2007 is forecast to be somewhat lower than in 2006, which will also contribute to slower growth in real household disposable income this year.
In view of these developments and expectations, nominal house price growth is projected to continue its downward trend of the past two years for most of 2007. Year-on-year growth of about 9% in house prices is forecast for this year, with prices set to rise by around 3% in real terms. With interest rates forecast to move to lower levels again in 2008, house price growth is expected to improve and increase to above 10% during that year and into 2009.
Original article published at www.rodneyhayter.com.
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