South African house prices increased by 15,8% year-on-year in October 2005, from a 17,6% increase in September, according to South African commercial bank Absa’s monthly house-price index released on Thursday.
This was the lowest year-on-year increase since August 2002, when it was 15,9%.
House prices exceeded a 30% increase in April last year after breaking above 20% in March 2003.
Absa ascribed the current declining monthly increase trend to the fact that housing has in general become less affordable, taking into account the sharp increase in prices towards the end of last year, salary and wage increases of well below 10% in 2004, and the relatively stable interest rates during the past 12 months.
Against this background, buyers appear to start showing some resistance against high asking prices, with indications that the difference between asking and selling prices has increased, while properties remain longer on the market before being sold.
The affordability of housing is an important factor that will drive property price growth as the year progresses. However, with a wide range of supporting factors still present in the market, slower average growth and not lower property prices is expected this year.
Absa expects nominal growth in house prices of about 22% for 2005, compared with a forecast range of 15% to 20% made at the beginning of the year.
At this stage, Absa is projecting a nominal house price growth of between 5% and 10% for 2006, which implies that house prices may decline on a month-on-month basis at some stage in 2006.
Growth in house prices for 2004 came in at 32,1% year-on-year, compared with 21,4% in 2003 and 15,2% in 2002. — I-Net Bridge