Johannesburg - Smaller sized homes are leading the charge back into positive growth territory, Absa's House Price Index said on Monday.
Houses sized 80m²-140m² recorded an increase of 9.6% year-on-year (y/y) in March, compared with 7.3% y/y recorded in February.
Small houses also showed real growth of 1.5% y/y in February, after still declining by 1.5% y/y in January.
"Affordability issues will become more important for households (this year)," said Jacques du Toit, senior property analyst at Absa's home loan division. "So there will be more focus on smaller homes, and a greater demand."
The average value of a small house was R725 200 in March, said the index.
According to Du Toit, higher electricity and water prices will place affordability issues under strain. "Prices are rising, but households are still under pressure," he said.
FNB?s home loans department concurred. According to its index released last week, house prices are finally showing real returns. However, it is becoming harder to afford a house as the wage and income gap widened in 2010.
Last year, house price deflation and ongoing wage inflation had the effect of making homes more affordable.
FNB said average home values will continue to increase and the recent economic data was the "shining light" for residential property prices.
The Consumer Price Inflation figure dropped in February, and Sarb's leading business indicator for January showed further economic growth was likely in the short term and mortgage rates were at their lowest level in three decades.
The index showed medium-sized houses (141m²-220m²) increased by 4.2% y/y in March, after rising by a revised 2.8% y/y in February. The average medium house price was R965 300 in March.
The average nominal value of large houses (221m²-400m²) increased by 5.3% y/y in March this year, up from 4.8% in February. The average large house price was R1 438 200 in nominal terms in March.
"It looks like an improvement is taking place, but it won't be a speedy return to the good times of a few years ago," said Du Toit.
"Households are still under a lot of pressure and debt levels are incredibly high."
According to the index, growth in the nominal value of houses is forecast to rise 6% to 7% in 2010 compared with last year.
- Fin24.com