Large, medium and now also small houses are all showing declining nominal price growth rates on an annual basis.

This is according to Absa’s House Price Index for August, which showed that even the year-on-year (y/y) price growth in the nominal value of small houses has slowed down in August. Moreover, the y/y growth in the value of middle-segment homes for which Absa approved mortgage finance, slowed down further in August after peaking in April this year.

The average nominal value of small, medium and large houses increased by a weighted 7,1% in August, down from a revised growth rate of 9,4% y/y in July.

The average nominal price of a house in the middle segment of the market was around R1,036,600 in August 2010. In real terms, after adjustment for the effect of inflation, middle-segment home values were up by 5,5% y/y in July (after real growth of 7% y/y in June), based on consumer price inflation slowing down to 3,7% in July from 4,2% y/y in June.

Jacques du Toit, property strategist at Absa, says the slowing in house price growth can be largely attributed to base effects, as property price growth recovered markedly in the second half of 2009.

Overall, house prices in the middle segment of the market increased by an average of 10,5% y/y in nominal terms in the first 8 months of 2010, with real price growth in this category of housing averaging 5,8% y/y in the period January to July this year. This real price growth is based on an average headline consumer price inflation rate of 4,9% y/y in the first seven months of the year.

The value of small houses (80-140sqm) increased by a nominal 28,3% y/y in August, slightly down from a revised 28,7% y/y in July. The average nominal value of a home in this segment was about R837,100 in August. In real terms, the value of a small house was up by 24,1% y/y in July, after rising by 23% y/y in June.

In terms of medium-sized houses (141-220sqm), the average nominal value of properties increased by 5,4% y/y in August, down from a revised growth rate of 6,2% y/y recorded in July. The average nominal price of a medium-sized house was around R961,700 in August. Real price growth came to 2,4% y/y in July this year, marginally higher than the 2,3% y/y growth rate registered in June.

In August the y/y growth in the average nominal value of large houses (221-400sqm) tapered off to a disappointing 4% y/y from 4,7% y/y in July. This brought the value of a large house to a level of around R1,458,600 in nominal terms during this month. In real terms the average value of a home in the large segment was up by 1% y/y in July, after increasing by 1,2% y/y in June.

Du Toit says y/y house price growth is expected to slow down further towards the end of 2010, with prices forecast to grow at an average of about 10% in nominal terms for the full year. “Real price growth for 2010 is forecast at between 5% and 5,5%, after prices declined by a real 7% in 2009.” – Eugene Brink

Readers' Comments Have a comment about this article? Email us now.