SA house price growth subdued - index

Johannesburg - Property market and house price growth prospects in the second half of the year do not look rosy, according to Absa property analyst Jacques du Toit.

This covers factors such as economic growth, employment, inflation and interest rates as well as consumer issues like income growth, savings, credit demand, debt servicing, credit-risk profiles and confidence.

"Nominal house price growth is forecast to average around 6% in 2015 and may slow down even further in 2016 on the back of trends in and the outlook for the economy and the household sector, which will be reflected in the property market," said Du Toit.

"With the headline consumer price inflation rate forecast to rise to above the upper limit of the inflation target range of 3% to 6% towards the end of the year and for most of 2016, there is a significant probability of house prices deflating in real terms up to late next year."   

READ: Middle-segment house price growth continues

Du Toit said year-on-year growth in the average nominal value of middle-segment homes in the SA residential property market remained subdued in the first half of 2015.

After adjustment for inflation, real house price deflation was evident in some housing categories in May compared with the same month a year ago.

Nominal month-on-month growth in house prices remained relatively low in the second quarter of 2015, averaging 0.5% during this period while declining in real terms in the three-month period of March to May this year.

In May house prices were still down by an average of 10.5% in real terms compared with the peak in August 2007.

READ: The slow puncture of property prices has begun

Average values

According to Absa house price indices, the average nominal value of homes in each of the middle-segment categories in June 2015 was R830 000 for small homes (80m²-140m²), R1 224 000 for medium-sized homes (141m²-220 m²) and R1 892 000 for large homes (221m²-400m²).

"The gradual slowdown in year-on-year house price growth, which commenced in October last year and is largely driven by economic trends and developments regarding household finances, is showing early signs of temporarily levelling out as a result of base effects," said Du Toit.

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