July ABSA House Price Index Middle-segment house price growth slowed down from a year ago Nominal year-on-year growth in the average value of homes in the middle segment of the South African housing market slowed down in June 2013 from May. Base effects and subdued monthon- month price growth are having a moderating effect on year-on-year price growth. These trends 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, medium-sized and large homes (see explanatory notes). Price growth in middle-segment housing was recorded at a nominal 11,8% year-on-year (y/y) in June from a revised growth rate of 12,2% y/y in May this year. The first six months of 2013 saw the average value of middle-segment homes rising by 11,2% y/y. The declining trend in year-onyear price growth continued in the categories of small and medium-sized housing, with month on month price changes remaining under pressure. Price growth in the segment for large homes appears to be near an upper turning point. Real price growth in middle-segment housing, i.e. after adjustment for the effect of consumer price inflation, came to 5,3% y/y in May on the back of an inflation rate of 5,6% y/y in the month. The average nominal value of homes in each of the three middle-segment categories was as follows in June 2013: Small homes (80m²-140m²): R730 300 Medium-sized homes (141m²-220 m²): R1 077 100 Large homes (221m²-400m²): R1 679 100 South Africa’s real economic growth is forecast at 2,3% for 2013, to be driven by expected global growth of 3,3% and domestic economic developments. Household sector finances are set to continue to experience some financial strain this year, with growth of below 3% expected in real disposable income and consumption expenditure, while savings will remain low. The general state of consumer credit records (9,53 million credit-active consumers had impaired credit records in the first three months of 2013) limits the accessibility of credit and affect household consumption expenditure, which had a share of about 61% in the country’s gross domestic product in the first quarter of the year. Against this background consumer confidence is low and not expected to show a significant improvement in the rest of the year. In view of declining economic growth and upward pressure on inflation, domestic interest rates remained unchanged in the first half of 2013, and are forecast to stay at current levels up to mid-2014 before rising to keep inflation under control. The continued low interest rates support the property market and benefit the affordability of housing and mortgage finance. Taking account of house price trends and the various factors impacting the housing market, single-digit nominal year-on-year price growth is forecast for the full year. Real house price growth will continue to be driven by a combination of movements in nominal prices and consumer price inflation.
Posted on: Wed, 04 Sep 2013 06:33:36 +0000
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