House Price Indices
Category Market News
December 2013 saw year-on-year growth in the average value of homes in the middle
segment of the South African housing market slowing down further, after peaking around
April last year. This was the result of base effects and continuing month-on-month price
growth of less than 1% up to year-end. Economic conditions in general as well as trends in
household finances and consumer confidence have also affected the property market and
property price growth during the course of the year. These trends in house prices are
according to the Absa house price indices, which are based on applications for mortgage
finance received and approved by the bank in respect of middle-segment small, mediumsized
and large homes (see explanatory notes).
Average nominal year-on-year price growth was in single digits in all three middle-segment
categories of housing in 2013. The average nominal value of homes in each category was
as follows in December last year:
- Small homes (80m²-140m²): R778 000
- Medium-sized homes (141m²-220 m²): R1 085 000
- Large homes (221m²-400m²): R1 720 000
The country’s economic performance was under pressure during 2013, with real growth
estimated to have been 1,8% on the back of major production losses as a result of labour
strikes, while growth in consumption expenditure remained low. Based on expected trends
in global growth and prospects for the domestic economy, growth in the country’s real
gross domestic product is forecast to rise to 2,7% in 2014.
Consumer price inflation slowed down to 5,3% year-on-year (y/y) in November as a result
of a drop in fuel prices and lower food price inflation. However, domestic fuel prices edged
up again in both December and January on the back of movements in the rand exchange
rate and international oil prices, which will cause inflationary pressures. Consumer price
inflation is forecast to average 5,7% in 2014. Based on the outlook for the economy and
inflation, interest rates are forecast to remain unchanged until the third quarter of 2015
before being hiked.
The residential property market will continue to be driven by economic developments and
trends in household finances and consumer confidence. Single-digit nominal house price
growth is forecast for 2014, while real price growth will be constrained by consumer price
inflation which is expected to be just below the 6% level for the year. Continued low
interest rates will support the housing market and the demand for mortgage finance.
Click HERE for the full report
Author: Jacques du Toit
