July house price growth lowest in nine years

7 Aug 2008

The Absa house price index shows that July saw the lowest house price growth in almost nine years, which was attributed to deteriorating market conditions on the back of rising inflation and interest rates, which adversely affected household finances and the affordability of housing.

The average nominal price of middle-segment housing increased by 3.2% year-on-year (y/y) in July this year, down from a revised growth rate of 4% in June.

The July growth rate was the lowest since September 1999, and brought the average nominal price of a house in this segment of the market to about R967,600.

Compared with June this year, house prices increased by only 0.1% in July. In real terms, prices dropped for the fifth consecutive month in June, by 7.3% y/y (-6.2% y/y in May), based on headline CPI inflation. On a month-on-month basis house prices were down by a real 1.1% in June.

In the category of small houses (80m²-140m²), nominal price growth slowed to a level of 4.9% y/y in July 2008 compared with a growth rate of 6.1% y/y registered in June. This brought the average nominal price of houses in this category to about R680,800 in July, with prices declining by a marginal 0.1% on the preceding month.

Taking account of the effect of inflation, the average price of small houses dropped by a real 5.4% y/y in June this year after a decline of 4.1% y/y was recorded in May. In June this year average house prices in the small category was 1.3% lower than in May.

Nominal year-on-year price growth in respect of medium-sized houses (141m²-220m²) came in at just 2.1% in July 2008 (3.3% y/y in June), which brought the average price to around R937,300 in July.

Compared with June, no nominal price growth was recorded, while prices have declined by 1.2% in nominal terms between December last year and July this year. In real terms, the average price of medium-sized housing was 7.9% y/y lower in June (-6.3% y/y in May). On a month-on-month basis, prices declined by a real 1,4% in July compared with June, after declining by 1.3% in real terms in comparison with May.

With regard to large houses (221m²-400m²), nominal price growth of 3.6% y/y was recorded in July 2008, down from 5.3% y/y in June. On a monthly basis, the average price was a nominal 0.3% lower in July than in June. This brought the average price in this category of housing to a level of about R1,385,800 in July.

Taking into account the effect of inflation, the average price of large houses was 6.1% y/y lower in June (-4.1% y/y in May), while in comparison with May this year, prices were down by a real 1.5% in June.

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