The average nominal price of middle-segment housing declined by 2,7% year-on-year (y/y) to R941 600 in April, after declining by a revised 2,3% y/y in March, the country’s biggest mortgage lender, Absa, said on Wednesday.
On a month-on-month basis, nominal house prices were 0,4% lower in April compared with March.
The April price drop was the biggest since November 1986, when it was -3,0% y/y, the bank said.
Middle-segment house prices were down by a real 9,9% y/y in March (-9,5% y/y in February).
“Real house price calculations are based on the consumer price index (CPI) for all urban areas, available from January 2008, as published by Statistics South Africa. Before this date the calculations are based on the historical CPI for metropolitan areas, linked to the CPI for all urban areas, which is the inflation measure used by the Reserve Bank for monetary policy purposes,” said Absa.
“As was the case in recent months, house prices were in April again down the most in the large category on a year-on-year basis, while the small category posted the smallest decline. This is regarded as an indication of the strain experienced in the market for larger and more expensive properties, with buyers focusing on smaller and more affordable homes,” said the bank’s senior property analyst Jacques du Toit.
In the category for small houses, the average nominal price dropped by 1,0% y/y in April this year (-0,9% y/y in March), which brought the average price to about R677 000.
In real terms, prices in this category of housing were down by 8,7% y/y in March (-8,6% y/y in February).
The average nominal price of medium-sized houses declined by 3,2% y/y in April 2009 (-2,7% y/y in March).
This brought the average price in this category of housing to around R918 100.
In real terms, prices were 10,3% y/y lower in March, after declining by a real 9,9% y/y in February.
In respect of large houses, the average nominal price declined by 4,0% y/y to around R1,340-million in April this year, after a drop of 3,6% y/y was recorded in March.
This was the biggest nominal year-on-year price decline since September 1985, with the average price now R57 000 below the peak of R1,397-million in March last year.
Prices of large houses were down by a real 11,2% y/y in March this year, after declining by 10,6% y/y in February.
This was the biggest real year-on-year price drop since December 1986, when it measured -13,8%.
“Data recently released with regard to various short-term economic indicators such as manufacturing production, mining production, retail sales, new vehicle sales and electricity production and consumption, point to the economy experiencing recessionary conditions,” the bank said.
“Projections are for a contraction in the economy in the first half of 2009 before bottoming and recovering gradually in the second half of the year.”
The bank noted that against this background, real GDP growth for 2009 was forecast at -0,5%, putting pressure on employment and household income.
“In view of an expected poor economic performance this year, impacting employment and income levels, many households may remain under financial pressure, despite the 3,5 percentage points worth of interest rate cuts since December last year, and expectations of some further cuts in the near term,” it said.
Absa said that the housing market was forecast to continue experiencing relatively low levels of activity and downward pressure on prices until late 2009, with house prices projected to decline by 3% to 4% in nominal terms and 8,5% to 9,5% in real terms this year. — I-Net Bridge