Cape Town - Year-on-year growth in the average value of middle-segment homes in the South African residential property market was markedly lower in 2015 compared to the preceding two years, according to the latest Absa House Price Index.
According to Jacques du Toit, property analyst at Absa Home Loans, this was against the background of macro-economic developments that impacted consumer finances and confidence.
Nominal price growth in the middle segment came to just below 5% year-on-year (y/y) in December last year. In real terms - after adjustment for the effect of headline consumer price inflation - middle-segment house price growth is estimated to have been around the 1.5% level in 2015. This is compared to 4% and 3.1% in 2013 and 2014 respectively.
After nominal price growth of 10% in 2013 and 9.3% in 2014, home values increased by around 6% in 2015 for the residential property market in general.
"The South African economy is forecast to show low growth in 2016, with factors such as rising inflation, higher interest rates and continued financial pressure on consumers to weigh on the economy’s performance," said Du Toit. "Against this background, subdued demand for and supply of housing is expected during the course of the year."
Nominal house price growth is forecast to average around the 5% level this year, with the risk for price growth to the downside in view of trends in and prospects for the economy and the household sector, he added.
"Nominal year-on-year price growth in middle-segment medium-sized and large homes edged somewhat higher in December last year after levelling out at an earlier stage," said Du Toit.
"This may be the result of the base effect of a downward trend in price growth in these two segments of housing that started late in 2014. This development may have the effect that year-on-year price growth in these two categories of housing may technically show a gradual upward trend in coming months."
In real terms, house price growth remained under downward pressure up to November last year, with virtually no real year-on-year price movement recorded in that month. Real year-on-year price deflation still occurred in the small category, whereas the medium-sized and large categories showed some real price inflation on a year-on-year basis.
"Based on the outlook for nominal price growth and the headline consumer price inflation rate, real house price deflation is projected over the next 12 months," he said.
The average nominal value of homes in each of the middle-segment categories was as follows in December 2015:
- Small homes (80m²-140m²): R887 000;
- Medium-sized homes (141m²-220 m²): R1 274 000;
- Large homes (221m²-400m²): R1 982 000.