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Johannesburg - House price growth in South Africa dropped further to a nominal 4.3% year-on-year (y/y) in the middle segment of the market in May this year from a revised 5.5% in April, according to the latest Absa House Price Index.
This is the lowest nominal y/y price growth recorded since October 1999, when it was also 4.3% and brought the average price of a middle-segment house to R960 700 in May.
Real house prices, meanwhile, are at levels last seen since 1997 and further confirming the plight of the market at the moment.
In real terms, house prices in the middle segment of the market dropped by 5.0% y/y in April 2008 compared with a decline of 3.4% y/y recorded in March, based on headline CPI inflation.
This is the biggest real year-on-year drop recorded in house prices since March 1997 when it was at a level of -5,2% y/y, based on nominal price growth of 3.9% y/y and a headline CPI inflation rate of 9.6% at the time, note the Absa researchers.
On a month-on-month (m/m) basis, revised nominal house price growth was negative to the tune of 0.1% between March and May this year, which was the first nominal m/m price drop since January 1999. As a result, the average nominal house price has declined by about 4,000 over the past three months.
In real terms, house prices dropped by a further 1.9% in April from March.
The real price of a middle-segment house has dropped by a total of R37 200, or 5.7%, from an all-time high of around R651 600 (at constant 2000 prices) in August last year to about R614 400 in April this year.
In view of the poorer inflation and rates environment, activity levels in the residential property market and for both nominal and real house price growth are forecast to slow down even further in the rest of 2008 and into 2009.
"In real terms, house prices are expected to decline this year compared with 2007, with a further real decline projected for next year," said the Absa property experts.
- I-Net Bridge