House prices fall as rates bite

By Staff Writer

From Fin24, Apr 1 2008.

Johannesburg - Median residential house prices fell in March as
household budgets come under strain from higher interest rates,
a survey showed on Tuesday.

The monthly Standard Bank property gauge put annualised house
prices down 5.2% last month - the first contraction in average
prices in almost eight years.

The median house price fell to R550 000 from R580 000 rand in
the same month in 2007, while the five-month moving average was
up only 0.2% year-on-year.

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"The persistent deterioration in the demand-side drivers of the
South African economy of late has increased the chances of
negative growth in residential property prices," the bank's
property economist Sizwe Nxedlana said in a statement.

"In March, residential property prices...entered into negative
territory for the first time since...June 2000."

A property boom between 2003 and 2005, boosted by interest rate
cuts, pushed house prices sharply higher, outperforming growth
in income and rentals and knocking affordability.

A series of rate increases, however, from mid-2006 has cut into
household budgets, making it more difficult to repay mortgages.

"The reduction in affordability has been exacerbated by the
reversal of monetary policy easing in the latter part of this
period (2004-2006)," Nxedlana said.

"By our estimates South African residential property remained
expensive in level terms in the second half of 2007."

But he added the recent low growth rates could signal a return
to affordability.

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