Nominal year-on-year growth of 23,3% in South African house prices was recorded in June this year, compared with a revised growth rate of 24,9% in May, according to the latest Absa house-price index released on Monday.
The average nominal year-on-year growth in house prices during January to June this year came to 26,9%, Absa said.
In real terms, year-on-year growth of 20,9% was recorded in May, compared with a revised growth rate of 22,1% in April, based on the headline consumer price index.
The average real year-on-year growth in house prices during January to May was 23,9%, which is based on a headline CPI inflation rate of 3% on average during this period.
On a month-on-month basis, nominal growth in house prices was 1,1% in June, compared with a revised 1,3% in May this year. In real terms, month-on-month growth of 1,3% was recorded in April.
Absa says that based on current interest rates and average house prices, the monthly mortgage repayment and the qualifying gross monthly income were 15,4% higher in June this year compared with June last year (16,9% in May).
Absa said that housing is still less affordable than a year ago, but the year-on-year growth rates of the mortgage repayment and qualifying income variables both peaked at 26,8% back in December 2004 and have since been on a declining trend.
This analysis indicates that the affordability of housing has not deteriorated thus far this year.
Looking ahead, interest rates are expected to remain relatively stable for the rest of the year, taking into account the latest trends in international oil prices and the rand exchange rate.
However, if there is a sharp increase in oil prices from current levels, together with a sharp weakening in the rand, the risk of higher inflation and eventually a hike in interest rates will increase significantly, Absa added.
Against the background of nominal growth in house prices of almost 27% in the first six months of 2005, price growth of at least 20% appears to be likely for the year as a whole.
Taking into account inflation expectations for this year, the real growth in house prices will be positive for a record sixth year in succession, Absa concluded. — I-Net Bridge