House price growth still low - Absa

Johannesburg - Growth in nominal house prices remained low, or was in negative territory in some segments of the market in the second quarter of 2011, according to Absa's calculations.

In some instances prices were rising steadily on a quarterly and annual basis, the bank said in its latest housing review.

"With consumer price inflation picking up during the second quarter, some real house price declines occurred on a quarterly as well as a year-on-year basis in the past quarter.

"House price trends varied at a geographical level in the country's provinces, metropolitan areas and major coastal regions. Price growth was evident on an annual as well as a quarterly basis in some regions in the second quarter of 2011.

"However, nominal price declines were recorded in a number of regions, while rising inflation caused prices to remain under pressure in real terms in the second quarter," Absa said.

It noted that the affordability of housing had improved further in the first quarter of 2011, impacted by low house price growth, slightly lower interest rates and rising household disposable income in the quarter. This is according to the latest trends in the ratios of house prices and mortgage repayments to household disposable income, it pointed out.

"Based on house price trends in the first half of 2011, and prospects for the economy and household finances, nominal house price growth of between 1% and 2% is forecast for 2011, rising to about 4% in 2012," the bank forecast.

"In consideration of the outlook for nominal price growth and the projection of consumer price inflation averaging 5% this year and 6% next year, house prices are set to decline in real terms in both 2011 and 2012," it added.