House price growth at 7-yr low

By Staff Writer

From Fin24, January 10 2008

Nominal year-on-year (y/y) growth in house prices in the middle-segment of the market slowed to a level of 11.2% in December 2007 from 12.5% y/y in November according to the results from the latest Absa House Price Index released on Thursday.

Don't have R964 000? Let Justmoney find the best bond for you

House prices were up by 14.5% in nominal terms in 2007 compared with 15.2% in 2006 and 22.6% in 2005.Real y/y price growth was only 3.8% in November - the lowest real growth since the 4.2% recorded in December 2002.

In the first eleven months of 2007, real growth in house prices averaged 7.5% y/y. The real growth rate is based on the headline consumer price index (CPI).

On a month-on-month basis, nominal house price growth slowed further to 0.3% in December from 0.4% in November. In real terms, house prices were unchanged in November from October.

"On the back of exchange rate and oil and food price movements in recent months, inflationary pressures in the economy have mounted further, causing the CPIX inflation rate to rise to a level of 7.9% in November last year," Absa said.

This was the highest CPIX inflation rate recorded since the 8.5% of April 2003.
"Inflation is expected to remain under upward pressure over the short term in view of an oil price of just below US$100/barrel and the rand exchange rate edging on R6.90 to the US dollar," Absa said.

These developments may lead to a further increase in fuel prices next month on the back of the current under-recovery in both petrol and diesel prices.

Against this background, CPIX inflation is forecast to peak at a level of well above 8% in the first quarter of 2008, which does not bode well for the interest rate outlook over the short term.

Absa said that growth in nominal house prices was forecast to taper off somewhat further in 2008 after the downward trend in price growth accelerated towards the end of 2007.

Nominal growth in house prices may drop to as low as 9% in 2008, largely driven by the tightening of monetary policy since mid-2006, the impact of the National Credit Act on the growth in credit extension to consumers, as well as an expected slower pace of economic expansion and lower growth in real household disposable income during the course of the year.

Recent Articles

Featured Rating agencies may come knocking

It is only the middle of February, but the rand has already made two big moves. The first was the rand moving from R14.60 to R 13.20 at the beginning of the year, as emerging markets (EM) became fashionable again. The second was where the rand gave away nearly 90 cents in 2 weeks as the EM rally ran out of steam, and local events started to hit the headlines.

Read more

The cost of sending money home to neighbouring countries

Transferring money home within the Southern African Development Community (SADC) provides vital financial support for many households in neighbouring countries.

Read more

Student bank accounts: Which come out on top?

Being a student signals budgeting and not having a lot of money at your disposal. This means streamlining expenses such as your grocery costs and entertainment budget. But what if your bank account is in fact costing you more than you can afford?

Read more

Can you afford an ambulance in South Africa?

When a loved one is straddling the line between life and death, you won’t hesitate to call an ambulance. This week, Justmoney found out how much an ambulance ride costs in South Africa, whether you can refuse to get into an ambulance, and who pays the bill if you’re unconscious. 

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

President Hotel Easter Special

Price: From R1,500
When: 15 March to 30 April
Where: Cape Town

Kulula-Preskil Island Resort Special

Price: R16,999
When: 11 May -14 September
Where: Mauritius

A Touch Of Madness Tuck In Tuesday Special

Price: R70
When: Tuesdays
Where: Cape Town