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04 Feb 2009 12:24
The housing market will start recovering gradually in the second half of this year, showing some noticeable growth in 2010, Absa’s latest House Price Index released on Wednesday showed.
The market was expected to remain under pressure in 2009, with house prices forecast to drop by a nominal 2,5% and a real 8%, said Absa economist Jacques du Toit.
The January House Price Index showed that in nominal terms prices were virtually constant from a year ago, while prices continued to decline in real terms up to the end of last year.
The average nominal price of middle-segment housing was marginally down by 0,03% year-on-year in January after almost no growth of just 0,1% year-on-year was recorded in December last year.
This brought the average price in this segment of the market to about R962 800 in January.
In real terms, middle-segment house prices were down by 8,6% in December, while declining by an average of 6,9% in 2008, after rising by 7% in 2007, Absa said.
Last year was the first time since 1999 that house prices dropped in real terms on an annual basis.
All real house-price calculations were based on headline consumer price inflation.
On a month-on-month basis, nominal house prices in the middle segment of the market had been on a declining trend since mid-2008, while in real terms prices had been declining month-on-month since September 2007.
Chief executive of the Pam Golding Property group, Andrew Golding, earlier this week said: “With more rate cuts anticipated during 2009, whether these translate into a total interest rate reduction for the year of 3%, 4% or even 5%, there is no doubt that while these will take time to flow through the system, the immediate effect will be to stimulate more positive sentiment which is always a key driver in the marketplace—and for the economy in general.”
He noted that such rate cuts would also help alleviate the pressure on those paying mortgages on their homes, and help increase affordability for those seeking to acquire their first homes.
Golding said the start of each calendar year generally tends to have increased transactional movement in the residential market, particularly among those relocating for business reasons.
“Although there are currently less overseas buyers than usually evident at this time of the year, we are still receiving enquiries from interested foreign buyers—including South African expatriates—as they perceive increased value in our property market, with sound investment opportunities currently available,” he said.
“We are also seeing an increase in the number of buyers prepared to commit to offers as buyers, and sellers have become relatively more acclimatised to the current economic scenario and more stringent lending criteria.”
Golding said it had, however, become apparent that the general requirement by financial institutions of at least a 10% deposit for the purchase of a home is creating major constraints—particularly for first-time buyers—with the knock-on effect of sustaining reduced transactional volumes.
“Generally and unsurprisingly, we also note a trend towards more cash deals as opposed to mortgage-financed sales in transactions than previously.”—I-Net Bridge, Sapa
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