Middle, lower segments set to drive house price growth | Fin24
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Middle, lower segments set to drive house price growth

Oct 08 2015 21:30

Cape Town - With strong demand for housing in the middle and lower segments of the market, house price growth in South Africa is expected to show the best performance in these areas, according to Absa Home Loans property analyst Jacques du Toit. 

Year-on-year (y/y) growth in the average nominal value of homes in the middle-segment categories remained relatively low in the first nine months of 2015, according to Absa house price indices. The indices are based on bond applications received and approved by the bank.

Marginal month-on-month price growth of less than 0.2% was recorded in September, contributing to relatively low y/y price growth.

Real house price growth - after adjustment for the effect of consumer price inflation - was still under pressure up to August. This comes against a background of subdued nominal price growth and trends in consumer price inflation during the course of the year.

Some real y/y price inflation was recorded in the small and large categories of middle-segment housing in August, with the average price of medium-sized housing declining slightly in real terms from a year ago.

The average nominal value of homes in each of the middle-segment categories was as follows in September 2015:

• Small homes (80m²-140m²): R884 000
• Medium-sized homes (141m²-220 m²): R1 225 000
• Large homes (221m²-400m²): R1 955 000

                                                                            (Source: Absa)

"Economic, employment and income growth will remain important factors, together with trends in inflation, interest rates and consumer confidence," said Du Toit. These macro-economic trends affecting household finances will be reflected in banks’ risk appetite and lending criteria.

"The expectation is for growth of 5% to 7% in the various categories in the rest of 2015 and in 2016," said Du Toit. And with inflation expected to average near the 6% level for the rest of the year and in 2016, real price growth is set to be under pressure.

"First-time home buyers will have a strong focus on housing and mortgage finance affordability, taking account of their financial position," said Du Toit.

absa  |  house prices  |  house price growth  |  property


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