South africa's 'significant slowdown'

Housing growth in South Africa has fallen to a near ten-year low, claims Knight Frank…

Although impressive by international standards, the 12.3% growth recorded in South Africa represents a significant slowdown for the South African market, and is the lowest annual growth figure since Q4 1999.

Consumer price inflation of 9% makes the rate of real house price growth even less impressive. The market has slowed, predominantly as a result of rises in interest rates in the second half of 2007, but also as a result of the implementation of the National Credit Act on 1^st June 2007.

This saw a tightening of lending criteria and put the legal onus on banks and building societies to ensure that loans are only granted where it can be proven that repayments will not exceed 30% of an applicant’s disposable income.

The outlook for house price inflation over the next year remains uncertain as although inflation is expected to remain high, new residential construction is predicted to slow, raising levels of demand for existing homes. Income growth over the next year is also uncertain as the electricity crisis in South Africa will affect productivity and thus may impact on levels of housing affordability.

Liam Bailey, Head of Residential Research, Knight Frank says:“The Knight Frank Global House Price Index shows that while property prices in Europe and America appear to be suffering from the downturn in economic conditions; prices in Asia and elsewhere, notably Singapore and Hong Kong, are performing very well.