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'Expect modest growth in house prices'

Johannesburg - Residential property prices will achieve modest growth this year, and home buyers should take advantage of the current favourable environment, financial services provider ooba said on Tuesday.

"This is likely to be at a reduced rate than the level of growth recorded last year, however with interest rates remaining at historically low levels home buyers are being urged to take advantage of the current environment to secure a favourable home loan,"  chief operating officer Rhys Dyer said.

People could expect nominal growth in property prices of between 4% and 5% this year.

"This is very much in line with inflation forecasts, resulting in very little real growth in property prices for the year."

Interest rates were likely to remain at current low levels, the lowest for over three decades, inflation forecasts remained benign and real increases in wage growth were expected in 2011.

This could potentially lead to people having more disposable income, Dyer said.

Low growth was being driven by low demand - due to high household debt to disposable income levels, the current economic climate and the fragile state of the labour market.

"Debt to disposable income levels, although off their highs from last year, are still sitting at 78%, compared to levels of 60% in 2005. With little further impetus likely to occur in 2011 from reduced interest rates, the debt to disposable income ratio is likely to remain sticky at current levels, continuing to subdue demand," he said.
 

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