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Johannesburg - The year-on-year (y/y) price growth for homes in the middle segment of the residential property market slowed considerably to 1% in October from a revised 3% in September, Absa's house price index showed on Thursday.
This brings the average price of a middle segment home to R1 005 800.
The increase in house prices has been slowing since May 2010.
Absa said that despite interest rates being at a 30-year low, consumers' lack of ability and willingness to spend and take up credit - including mortgage finance - are affecting the property market.
"Consumer confidence was largely unchanged in the first three quarters of the year, while the level of business confidence was lower in October after rising only marginally in September," it said.
Absa property analyst Jacques du Toit said nominal house price growth of 7% to 8% is forecast for the full year. Real price growth of between 2.5% and 3.5% is expected, depending on nominal price growth and average consumer price inflation for the year.
In real terms the average value of homes in the middle segment of the market was down by 0.2% y/y in September 2010 (up 1.9% y/y in August), based on consumer price inflation slowing to 3.2% y/y in September from 3.5% y/y in August.
The September y/y drop in real price levels was the first since November 2009.
Absa said that the average nominal value of small houses (80m² to 140m²) rose by 9.8% y/y in October, down from a revised 13.7% y/y in September, which brought the average price to about R732 200 in October.
In the segment of medium-sized houses (141m² to 220m²) the average nominal value of a home was up by 3.5% y/y in October, after going up by a revised 4.5% y/y in September. This brought the price in this category to about R955 200 in October.
In the large home category (221m² to 400m²) the average nominal price level dropped by 0.4% y/y in October – the first such decline since June 2009.
This year-on-year deflation came after a relatively small price rise of only 0.3% y/y in September.
The average value of a large house was about R1.4m in nominal terms in October. In real terms, the average price in the large segment was down by 2.8% y/y in September, after declining by 2% y/y in August.