The year-on-year growth in residential house prices was constrained in April, according to the Absa House Price Index released on Monday.
"Home values in the small, medium-sized and large categories of housing in South Africa for which Absa approved mortgage finance, experienced some further strain in April 2011 on a year-on-year basis," said Jacques du Toit, sectoral analyst at Absa Retail Bank, in a statement.
Each of the segments however grew marginally on a nominal basis - where the effects of inflation are not taken into account - when compared to the previous month.
In real terms, which factor in the effects of inflation, home values dropped further in all three segments in March 2011.
Consumer price inflation for March was 4.1% year-on-year, up from 3.7% in February.
"In the period January to March this year, real price declines occurred in the three categories compared with the corresponding period in 2010," Du Toit said.
The average value of small houses (80m²-141m²) showed a nominal year-on-year price drop of 3.5% in April 2011. In March, it was -1.2%.
The average price of a small house was around R766 300 in April.
Du Toit said the average nominal value of medium-sized homes (141m²-220m²) declined 0.1% year-on-year in April 2011, after rising only 0.1% year-on-year in the preceding month.
The average price of a medium-sized house was about R972 900 in April.
Large houses (221m²-400m²) showed nominal year-on-year price growth of two percent in April. This was down from 2.5% in March.
This brought the average price of a large house to around R1 489 700 in April.
Du Toit warned that inflationary pressures were mounting due to rising energy costs and food prices, while employment and consumer confidence were down in the first quarter of 2011 compared with the fourth quarter of 2010.
He said growth in household credit extension remained low in the first three months of 2011, showing the state of house finances and the difficulty in taking up credit.
"In view of these developments and the expectation of inflation rising to an average of just below 6% year-on-year in the fourth quarter of 2011, interest rates are currently forecast to remain unchanged until early 2012, when the first rate hike is expected."
He predicted the prime rate would rise by 250 basis points over 2010 to 11.5% by year-end.
He also expected average nominal house price growth of between 1% and 1.5% this year.
"Real house price deflation of 3.5% to 4% is projected for 2011, based on the forecast for nominal price growth and headline consumer price inflation expected to average five percent this year," he said.