House prices continue drop

Johannesburg - The lates data for median house prices yielded a rate of contraction of 5.2% y/y, the same decline as in August, according to the Standard Bank House Price index released on Thursday.

In real terms, using the bank's estimate of the CPI in September to deflate nominal house prices, the decline in real house prices comes to approximately 11.5%.

The smoothed growth rate for September shows that the value of the median residential properties financed by Standard Bank was R550 000.

Standard Bank's property book for the first nine months of 2009 revealed an average monthly decline of 4.2% in the median house price.

This brings the number of monthly declines to 16 consecutive months, the bank said.

"Important drivers of overall growth in the economy, such as the level of household income and debt, as well as the medium-term economic and financial outlook, are such that a quick turnaround in the housing market is improbable," said the bank's Johan Botha.

"The most that we can hope for is for price declines to stabilise towards the end of the year as the recent interest rate cuts work their way through the economy, and consumer and business sentiment improve."

Botha said the mix of industry-wide loan-to-value restrictions, negative income growth and concerns about job security would without doubt weigh on the property market.

Furthermore, in the short-term, any easing in credit granting criteria will be mild, as upside risks regarding uncertainty in job security and income growth continue, said Botha.

In due course, though, taking into account the accumulated impact of declining interest rates and lower inflation, house prices will be stimulated.

"This is only expected in early 2010," he concluded.

- I-Net Bridge