According to the latest Absa house-price index, nominal house prices rose by 17,6% year-on-year in September, versus a revised 19,6% in August, the lowest year-on-year growth since December 2002, when it was 17,3%.
Releasing the data on Wednesday, Absa said the average nominal year-on-year growth in house prices during the first nine months of the year was 24,3%.
On a month-on-month basis, nominal growth in house prices was 0,6% in September, compared with a revised 0,8% in August this year. In real terms, month-on-month growth was 0,4% in August.
In real terms, house prices rose by 15,1% year-on-year in August, compared with a revised growth rate of 17,6% in July, based on the headline consumer price index. The average real year-on-year growth in house prices during January to August was 21,4%, which is based on a headline CPI inflation rate of 3,2% on average during the period.
The monthly mortgage repayment and the qualifying gross monthly income were 13,8% higher in September 2005 compared with September last year, based on current interest rates and average house prices. In August, the year-on-year growth in these variables was 14,2%. According to Absa, this implied that housing was on average still less affordable than a year ago.
Looking ahead, Absa senior economist Jacques du Toit said that in view of recent trends in the international oil price and domestic fuel prices, CPIX inflation is expected to be under upward pressure during the rest of the year.
As a result, interest rates are forecast to remain at current levels until early next year, when a rate rise of 50 basis points might occur.
The banking group is forecasting nominal house-price growth of about 21% for the year as a whole, compared with growth of more than 32% recorded last year. The affordability of housing, taking into account house price, income and interest rate trends, will remain an important factor over the next 12 months, especially for first-time and low- to middle-income home buyers.
In 2006, Absa expects nominal house-price growth of 5% to 10%.
The Absa house-price index is based on the total purchase price of houses of between 80 square metres and 400 square metres, valued at R2,2-million or less in 2004 (including improvements), in respect of which loan applications were approved by Absa.
Prices are smoothed in an attempt to exclude the distorting effect of seasonal factors and outliers in the data. As a result, the most recent index figures may differ materially from previously published figures. — I-Net Bridge