Property prices continue to fall

The South African property market continues to bleed as house prices dropped in nominal terms in April according to figures released by Absa. Its House Price Indices show that a decline in all three segments in April.

Absa’s senior property analyst, Jacques du Toit, said that in the segment for small houses (80sqm – 140sqm) the drop was 3,5% in April while in the medium-sized segment (141sqm – 220sqm) prices declined by 0,1% year-on-year and in the category of large houses (221sqm – 400sqm) the nominal y/y price growth dropped by 2%.

He says that inflationary pressures are mounting in the South African economy on the back of rising energy costs and higher food prices. “Both employment and consumer confidence were down in the first quarter of 2011 compared with the final quarter of last year,” says Du Toit.

He expects inflation to rise steadily this year reaching a level of just below 6% in the fourth quarter but that interest rates are likely to remain steady until early in 2012 when the first rate hike is expected.

“The house price trends in the first few months of this year, coupled with the outlook for economic growth, inflation and interest rates will have a direct impact on household finances. As a result, house price growth is expected to be small at between 1% and 1,5% this year.

“Worse than that though is that a drop in the real price of houses is forecast to be between 3,5% and 4% this year although in nominal terms prices might rise.

The average price of a small house is now about R766 300 and a medium sized house is R972 900 – a decline in real terms of 3,9% y/y – while large houses are costing R1 489 700, a drop of 1,8% y/y in real terms. – property24.com

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Property prices rise despite rise in mortgage declines

The average house price rose 6.8 percent year-on-year in June to R837,599 from R784,427 a year earlier.

The growth in the average purchase price amongst first-time buyers remained strong, with year-on-year growth of 12.1 percent in June.

According to the mortgage companies, the average approved bond size increased 14.3 percent year-on-year in June to R695,381, compared with R608,316 a year earlier.

The average deposit as a percentage of purchase price fell 24.4 percent year-on-year to R142,218, equivalent to an average deposit of 17 percent of the purchase price.

The average ratio of bonds declined increased marginally in June, up 1.3 percent year-on-year to 48.8 percent from 47.5 percent a year earlier, due to the higher proportion of 100 percent loans in June. On a month-on-month basis the decline ratio fell 4.1 percent to 48.8 percent from 52.9 percent in May.

The ratio of applications declined by one lender, but approved by another, increased 7.5 percent year-on-year to 24.8 percent.

“This is good news for homebuyers, as it indicates a higher probability of loan approval from another bank even if initially declined.

General sentiment had no doubt been enhanced by the successful hosting of the World Cup.

“Overall, the signs remain positive for the housing market, although we expect price growth to continue at a slightly slower pace in the second half of the year.”

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