Guiding consumers since 2009

Nominal house price growth forecast at 5-6%

By Staff Writer

Nominal house price growth of between 5% and 6% is projected for 2008, resulting in a price decline of around 4.5% this year, according to the country's biggest mortgage lender Absa. This is taking into headline consumer price inflation projections, it says.

This will be the first time since 1999 that real price growth will be in negative territory. The banking group said CPIX inflation, currently at above 10% and well above the 6% upper limit of the inflation target range, is forecast to remain under upward pressure over the short term on the back of international oil price, food price and exchange rate movements.

As a result, inflation expectations will remain high in coming months, which will have a significant effect on demands for higher wages this year. According to the latest projections by the South African Reserve Bank,CPIX inflation is expected to gradually decline from around the second quarter of 2008 to only reach the 6% level by late 2009.

"In view of these developments and expectations on the inflation front, the Reserve Bank's Monetary Policy Committee is expected to hike interest rates again in June, with a risk of further rate hikes later in the year ifCPIX inflation remains stubbornly high.

Interest rates are forecast to stay high throughout 2009 in an attempt to get inflation under control, with rates only to be cut in early 2010," says Jacques du Toit, senior property analyst at Absa.

These factors, as well as the effect of the National Credit Act, he says, are set to cause a further slowdown in the residential property market over the next 12 to 18 months as households' financial position remains under pressure with growth in real household disposable income forecast to be significantly lower in 2008 and 2009 than in the past few years.

"The affordability of housing, already a major issue for many prospective homebuyers in especially the low and middle-income categories, will become even more important against this background and cause homebuyers to consider even smaller, more affordable and higher density housing in future.

"In view of these expectations, nominal house price growth of 5% to 6% is forecast for 2008, with real prices set to decline by around 4.5% this year, taking account of headline consumer price inflation projections. "This will be the first time since 1999 that real house price growth will be in negative territory," says Du Toit.

In 2009, nominal house price growth is projected to decline even further to a level of just below 4%, with prices set to drop again in real terms next year. However, with the residential property market expected to slow down further towards the end of 2008, and bottoming in 2009, it will in the second half of this year and in 2009 be time to buy property, especially from an investment point of view, according to Du Toit.

He says investors in the housing market should not expect to achievepositive real capital appreciation during the next 24 months, but with an increase in demand for rental property, an acceptable income return may beachieved during this period.

"In view of property being a medium to longer-term investment (5 years and longer), property investors should look through the current downward cycle and focus on income returns, with a view of achieving positive real capital appreciation as from 2010," adds Du Toit.

Recent Articles

Featured Financial conflict can lead to divorce – here’s how to prevent it

Talking about money is an intimate matter, and it may be uncomfortable for couples who’ve managed to avoid this discussion. However, it will become necessary at some point or other. Do you think you’re ready to talk to your partner about money?

This is how much you should spend on accommodation

As your salary changes over time, your expenses will change too. But what if you’re spending an exceedingly large percentage of your income on accommodation? Is it feasible or even recommended in our current stressful financial climate?

How to be “future greedy” with passive income

Setting up numerous streams of income is a safe way to protect yourself from the loss of your main stream of income. Better yet, setting up passive streams of income will ensure you always have money coming in, without costing you additional working hours. So, what is “passive income”, and how can you earn this?

Can your debt be cancelled?

It sometimes happens that you struggle so much to pay your debt that you think of asking your creditor to write it off. But debt doesn’t just get written off. There are conditions that must be met and procedures that must be followed before the creditor cancels your debt.

 

Deals

FNB senior customers can earn up to 30% back in eBucks at Clicks

Price: Available on request
When: From 5 August 2020
Where: Nationwide

Bakwena Spa Women’s Day Special

Price: R549 per person
When: Until 31 August 2020
Where: Centurion, Hartbeespoort, Kuils River

Dis-Chem Pap Test Special

Price: R180
When: From 3 August to 11 September 2020
Where: Nationwide


Latest Guide

Guide to debt rehabilitation solutions