Nick Wilson
Property Editor
HOUSE prices in the middle segment of the market fell 5% year on year in April, the biggest drop in prices in 11 years, according to the latest Absa House Price Index.
Absa Bank said yesterday that this was a further decline from the 3,4% drop recorded in March. Higher interest rates and inflation, combined with the National Credit Act, were the main drivers for the market weakening.
Jacques du Toit, senior property analyst at Absa Home Loans, said the act made it more difficult for people to acquire credit because they had to “go through various affordability calculations”.
“Now with further interest rate hikes in the near future, the affordability of housing will come under pressure, which will push price growth to even lower levels,” said Du Toit.
This data comes a day after property veteran Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, said prices might fall as much as 40% from last year’s highs by the end of this year, especially at the upper end of the market.
Geffen said on Wednesday that this meant the market would drop, with the “prices of two years ago” being the “prices at year end”.
Du Toit said Absa was expecting continued decline in house prices in real terms over the next two years.
Samuel Seeff, chairman of Seeff Properties, said there was “literally no house price growth in most areas of SA”.
But Seeff said there were a “couple of areas” that were bucking that trend. “Those areas are very much the upper end of the market.
“These include Bantry Bay, Clifton and the Victoria & Alfred Waterfront (all in Cape Town).
“But for the rest of the market, what we’ve seen is that in general it is stagnating, and in real terms there is a decline,” he said.
Still, Seeff said he did not “believe that we need to go into panic mode”.
What the market had seen, and would continue to see, was a big drop in the number of sales taking place, he said.
“And, as a consequence, those sales that are taking place will favour the buyer.
“An astute buyer will get a good price but that doesn’t necessarily mean you are going to readjust the whole market.
“In the main, most sellers will prefer not to sell than to take a capital loss.”
Where sales were taking place, they would either be at market value, if the sellers had the correct asking price, or 10%- 15% below if the initial asking price was too high, Seeff said.
If sellers were under pressure to sell, they might bring down their prices dramatically, “but that will be the exception rather than the rule”, he said.