The good news is house prices are up 14% on last year. The bad news is this is the slowest growth in prices in four-and-a-half years.
While lower transfer fees — after lower transfer fees were announced by Minister of Finance Trevor Manuel in the Budget — were expected to bring resilience to the sector of the market up to R1-million, the cooling down in prices is across all sectors.
The Absa house-price index shows that the nominal year-on-year growth rate for June was 13,6%, down from 14,3% in May. The last time house-price growth was 13,6% was in January 2002.
Absa’s senior economist, Jaques du Toit, said there had been cooling across the entire property market. He said that prices would not improve in the second half of the year.
“House-price growth is still on a downward trend,” said Du Toit. “This could move into single digits in the second half of the year.
“Housing has become relatively expensive, which we see as a major reason why house price trends are experiencing downward growth.”
Du Toit said factors such as the large deficit on the country’s -current account, strong growth on credit extension, the weak rand and high oil prices had led to an increase in -interest rates and projections of further increases this year. “These pressures are still present in the economy and we expect them to be present later in the year, putting the property market under further pressure,” said Du Toit.
The average price of a house in the middle segment of the market now stands at R798 000. The average nominal year-on-year growth in house prices came to 15,3% in the first six months of 2006.
The house index shows the monthly mortgage repayment on a 100% mortgage on a house of R797 930 in June was R8 166, calculated over a period of 20 years and with an average mortgage interest rate of 10,87%.
Absa reported that the forecast is for interest rates to rise by a further 50 basis points at each of the three remaining monetary policy committee meetings this year. “This will bring the prime interest rate and variable mortgage rates to a level of 12,5% at year end. As a result of these expectations, house prices are projected to increase by about 12% year-on-year in nominal terms this year.”
The Absa house-price index, using 2000 as a base which equals 100, shows growth to 129,9 in June 2002 rising to 293,4 in June this year.