Sa spiked by 'downward shift'

New figures reveal that house price growth in South African has fallen to an 8 year low…

According to the latest ABSA House Price Index, house price growth slowed to a nominal 6.8% year-on-year in the middle segment of the market in April 2008, down from a revised 7.8% in March. This signals the fourth consecutive month of single-digit growth in nominal house prices since a growth rate of 11.2% was recorded in December 2007.

A spokesperson for ABSA noted: “In recent times, the focus of homebuyers has shifted from luxury, large and expensive properties to smaller and more affordable properties. As a result of these developments, the downward trend in year-on-year house price growth has accelerated since September last year.”

“With inflation still under strong upward pressure, inflation expectations will remain high over the short term, which will have a significant influence on demands for higher wages this year. Against this background, the Reserve Bank’s Monetary Policy Committee is expected to hike interest rates by another 50 basis points at the June meeting.”

In view of these developments and expectations, house price growth is forecast by ABSA to slow down even further in the rest of 2008 from current levels. Nominal price growth of well below 10% is projected for the full year, with real price growth expected to be in negative territory, which will be the first annual drop in real prices since 1999, when it was -0.3%.