The demand and supply of property is set to be on smaller-sized homes and higher-density houses because of affordability.
According to Absa Home Loans Quarterly Review, affordability has become a key factor in the housing market.
Absa Home Loans property analyst, Jacques du Toit says the growth in average home values remained low or declined in nominal terms in some segments of the market in Q2 2011 while in some instances, the prices were rising.
“Based on trends in home values in the first half of 2011, and prospects for the economy and household finances, nominal price growth in the middle segment of the market is forecast at between 1 percent and 2 percent for 2011.”
He explains that considering the outlook for nominal price growth and the projection of consumer price inflation averaging 5 percent this year and 6 percent next year, house prices are set to decline in real terms in both 2011 and 2012.
He says according to Stats SA, a total of 748 800 new houses were built in the affordable, smaller-sized and higher-density segments of the market since 1994 to June 2011. These houses were financed by the private sector.
A further total of 1 020 000 new homes were built including house of less than 80 square metres and 73.4 percent of all new homes built were small houses, flats and townhouses.
In light of the above, Du Toit says the economy is expected to grow by between 3.5 percent and 4 percent per annum. Inflation is also set to rise further and remain around 6 percent in 2012.
He says interest rates will remain stable in 2011 and increase by two percentage points between mid-2012 and mid-2013.
He adds that growth in mortgage advances will remain in single digits reflecting factors that impact household finances and the affordability and availability of mortgage finance. – Denise Mhlanga
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