South African residential house-price growth moderated slightly year-on-year in March but prices were not expected to fall despite higher interest rates, a survey showed on Tuesday.
The Standard Bank monthly property gauge indicated annualised house-price growth of 8,4% last month, a touch lower than 8,6% growth in February, while month-on-month growth was 1,8%.
The median house price increased to R580 000 in March.
Elna Moolman, economist at Standard Bank, said higher debt levels and an increase in interest rates in 2006 would continue to affect the residential housing market, although the impact would be moderate.
Debt repayment to income levels were still below historical peaks.
”This suggests that South Africans are still able to repay their existing debt, and hence are unlikely to accept lower house prices, which, in turn, suggests that nominal house prices are unlikely to fall,” she said.
South Africa’s property sector has been coming off a residential housing boom, which until recently saw the country experiencing some of the strongest growth in the world.
House-price growth reached a peak of almost 40% year-on-year in 2004.
The central bank raised interest rates by two percentage points during the second half of 2006, lifting the prime lending rate to 12,5%, while continued high consumer spending — much of it on credit — has pushed debt levels to record highs.
Household debt to income jumped to 73,8% in the fourth quarter of 2006, pointing to a strain on finances. But while debt is high, interest rates are still significantly below previous peaks.
Moolman also said South Africa was unlikely to experience the problems that had hit the United States sub-prime housing market.
The lower end of the US market has been knocked by bad debts, raising fears that the crisis may spread to the rest of the housing sector and drag down a slowing economy.
”Local house prices are unlikely to be affected materially by the lower segment crisis in the US. Local house prices are driven primarily by local economic factors,” she said. — Reuters