Banking group Absa says that house-price growth is at its lowest in four-and-a-half years.
According to the latest Absa house-price index, nominal year-on-year growth of 13,6% was recorded in June this year compared with a growth rate of 14,3% in May.
This was the lowest year-on-year growth since January 2002 when it was also 13,6% and brought the average price of a house in the middle segment of the market to about R798Â 000 in June. The average nominal year-on-year growth in house prices came to 15,3% in the first six months of 2006.
In real terms, year-on-year growth of 10% was recorded in May compared with a growth rate of 11,4% in April, based on the headline consumer price index. This was the lowest real year-on-year growth since March 2003 when it was 9,2%.
The average real year-on-year growth in house prices came to 11,6% in the first five months of 2006.
On a month-on-month basis, nominal growth in house prices was down to 0,6% in June compared with a growth rate of 0,7% in May. Real month-on-month growth of only 0,1% was recorded in May this year.
Based on an average mortgage interest rate of 10,87% in June this year, the monthly mortgage repayment on a 100% mortgage on a house of R797Â 930 in June was R8Â 166, calculated over a period of 20 years. This was 16,3% higher compared with May 2005.
The gross monthly household income required to qualify for the abovementioned mortgage of which the monthly repayment does not exceed 30% of income was R27Â 219 in June this year.
CPIX inflation increased to 4,1% in May on the back of a weaker rand exchange rate and an international oil price that is still around the level of $70 a barrel. CPIX inflation is projected to rise further to a level of about 6% by year-end. The deficit on the current account of the balance of payments was a massive 6,4% of gross domestic product in the first quarter of 2006, which contributed to the rand depreciating significantly against the major international currencies.
Year-on-year private sector credit extension remained high at 22,7% in May, with mortgage advances growth still at a level of 30% compared with a year ago.
“Against this background, interest rates are forecast to rise further by 50 basis points at each of the remaining MPC [monetary policy committee of the South African Reserve Bank] meetings in August, October and December this year. This will bring the prime interest rate and variable mortgage rates to a level of 12,5% at year end,” Absa said on Wednesday.
“As a result of these expectations, house prices are projected to increase by about 12% year-on-year in nominal terms this year,” it added. — I-Net Bridge