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June 2016
Housing
T
here is some uptick evident
in middle-segment house
price growth – according to
Absa Home Loans Property Analyst,
Jacques du Toit.
Year-on-year growth in the average
nominal value of middle-segment
homes in the South African residen-
tial property market showed some
improvement up to April 2016.
Year-on-year nominal price growth
in middle-segment housing was
recorded at 7,1% in April, slightly up
from6,8% in March. Real price growth
came to 0,5% year-on-year (y/y) in
March, after some real price deflation
of 0,6% y/y in February.
The uptick in house price growth
was driven by the segment for small
housing, with the categories of medi-
um-sized and large housing showing
relatively stable price growth in the
first four months of the year.
The accelerating price growth in
the small-housing segment since the
end of last year are the result of the
base effect of sharply declining price
growth in the corresponding period a
year ago.
Price growth in this segment of
the market may also be supported by
increasing financial strain on home-
buyers, causing a stronger focus on
affordability and buying smaller-sized
properties. The average nominal
value of homes in each of the middle-
segment categories for April:
• Small homes (80 m² - 140 m²):
R951 000
• Medium-sized homes (141 m² -
220 m²): R1 268 000
• Large homes (221 m² - 400 m²):
R2 008 000
Du Toit says that the residential prop-
erty market is expected to reflect the
increasingly tough economic condi-
tions and the impact of these on con-
sumers and homeowners.
Economic growth is forecast at a
much subdued 0,6% in 2016, with
headline consumer price inflation ex-
pected to increase to a level of above
7% by year-end.
The upward pressure on inflationwill,
Growth
in house
prices
to a large extent, be driven by a weak-
ening exchange rate and rising food,
fuel and electricity prices and further
interest rate hikes in coming months.
Prime lending and variable mortgage
interest rates, currently 10,5%per an-
num, are forecast at 11% by the end
of the year.
These developments will nega-
tively affect household finances, with
credit-risk profiles, financial vulner-
ability and consumer confidence to
comeunder further pressure. Thismay
cause credit providers to adjust risk
appetites and lending criteria.
“House price growth is forecast to
show a marked slowdown towards
year-end. This comes on the back
of trends and the outlook for the
economy and household finances,
with some real price deflation pro-
jected as a result of expected nominal
price growth and inflation trends,”
du Toit concludes.
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