According to the Absa house-price index, nominal house price growth of 12,7% year-on-year was recorded in October this year, compared with a revised growth rate of 13,5% in September. The bank’s researchers said this brought the average price of a house in the middle segment of the market to R830 700 in October.
The report highlighted that the average nominal year-on-year growth in house prices came to 14,7% in the first 10 months of 2006.
The Absa index is based on the total purchase price of houses in the 80-square-metre to 400-square-metre category, valued at R2,6-million or less in 2006 (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.
“In real terms, year-on-year growth of 7,8% was recorded in September compared with a revised growth rate of 8,1% in August, based on the headline consumer price index. The average real year-on-year growth in house prices came to 10,2% in the first nine months of 2006,” says the report, released on Monday.
On a month-on-month basis, nominal growth in house prices was 0,6% in October compared with a revised growth rate of 0,8% in September. House prices rose by 0,6% month-on-month in real terms in September (0,1% month-on-month in August).
“Inflationary pressures are still visible in the economy and CPIX inflation is forecast to move towards the 6% level by end-2006 and early 2007.
“Against this background, interest rates are projected to rise further, by 50 basis points at each of the monetary policy committee meetings in December this year, and in February and April next year. This will bring the prime interest rate and the variable mortgage interest rate to 12,5% at year-end and 13,5% by mid-2007,” the Absa researchers held.
“As a result of these expectations, house prices are forecast to increase by about 14% in nominal terms in 2006, taking into account price growth of 14,7% on average recorded in the first 10 months of the year.
“Nominal house price growth of around 6% is expected for 2007, with prices declining by almost 2% in real terms next year. This will be the first real decline in house prices since 1999,” the researchers concluded. — I-Net Bridge