The average price of a mid-segment house was almost 14% lower in November last year than it was in August 2007, according to Absa’s latest property price indices released on Thursday.
“The average real price of middle-segment houses, calculated at constant 2008 prices, was in November almost 14% below its peak of August 2007,” Absa Home Loans property analyst Jacques du Toit said in a statement.
“[This] was the result of average nominal house price growth being below the average headline consumer price inflation rate over the past four-and-a-half years.”
Nominal house price growth — where the effects of inflation are not taken into account — in the middle-segment of the South African housing market was 2.2% in 2011.
This was down from growth of 7.3% in 2010.
In real terms, when average annual inflation of 5% was factored in, house prices deflated by 2.7% in 2011.
The average nominal house price of small homes (80m² to 141m²) in December 2011 was R694 400, Du Toit said.
Dampening house prices
Medium-sized houses (141m² to 220m²) registered an average nominal house price of R985 400.
The average nominal house price of large homes (221m² to 400m²) was R1 548 200 in December.
Unchanged interest rates in 2011, rising inflation, relatively high levels of debt, damaged credit records and tight labour market conditions all played a role in dampening house price growth and demand for housing.
Du Toit said house price growth would probably remain subdued in 2012.
“Based on the outlook for the global economy and domestic growth, inflation, interest rates and the consumer sector, house price growth is forecast to remain relatively low this year, while prices are set to decline further in real terms,” he said.
The trends are based on the Absa house price indices for small, medium-sized and large homes in the middle-segment of the housing market for which the bank received and approved applications for mortgage finance. — Sapa
- A previous version of this story had the incorrect headline “House prices drop 14% in 2011”. This has been corrected.