An index tracking median house prices in South Africa fell 1,8% in August from a year earlier as tough financial conditions continued to weigh on the sector, a survey showed on Monday.
Standard Bank’s monthly residential property gauge has been in negative territory since March because higher interest rates and stricter credit laws introduced on June 1 2007, have weighed on the sector.
Property affordability has fallen since the central bank has raised rates by five percentage points in the past two years, stretching consumers to the limit at a time when they already face high inflation.
The median house price was R550 000 while the five-month moving average growth was recorded at 7,7% year-on-year.
Standard Bank said the August data might be a signal that the sector was stabilising, although it would remain under pressure.
”Over the short term, economic conditions are expected to deteriorate further,” said Standard Bank in a statement.
The central bank left rates unchanged in August and many analysts expect inflation to subside next year. That could prompt the central bank to cut rates as soon as April 2009.
”The residential property market is expected to improve only once fundamental drivers such as disposable income and interest rates turn the corner,” Standard Bank said.
Central bank data last week showed the rate of increase in mortgage approvals slowed to 19,1% year-on-year in July, from 19,9% previously.
”The weakening residential mortgage market is the overwhelming driver of the weakening in total mortgage advances growth,” First National Bank property strategist, John Loos, said in a note. – Reuters