The Standard Bank median house price index (smoothed) decreased by 1,5% year-on-year (y/y) in March, following declines of 3,6% y/y in January and 2% y/y in February, the latest Standard Bank property gauge showed on Wednesday.
“After posting the lowest annual growth rate in 12 years in 2008 when a decrease of -0,3% in the median house price of Standard Bank’s property book was reported, the first three months of 2009 extended the downward trend,” said Standard Bank’s Johan Botha.
The trend cycle of the March data confirmed that the weakness in the property market is set to continue longer.
“In real terms, using our estimate of the CPI in March of 8,3% to deflate the nominal house price, the decline in real house prices comes to approximately 9,8%,” said Botha.
He said that the smoothed growth rate of residential property prices for March 2009 shows that the value of the median residential properties financed by Standard Bank was R542k.
“The overall state of the economy early in 2009 and the medium-term outlook are such that an immediate, significant improvement in the housing market is decidedly improbable.”
Looking ahead, Botha said that it is evident that households find economic and financial conditions extremely challenging, while the tightening of lending criteria by financial institutions makes it more difficult to access finance.
“Over the short-term, economic conditions are expected to deteriorate further, but positive developments on the inflation front will lead to additional interest rate cuts in 2009,” he said.
Standard Bank expects a further 250 basis points relief in interest rates this year.
It is anticipated that house price growth will be negative over the short- and medium-term, but likely to improve somewhat towards the end of the year as the impact of interest rate cuts filter through the economy and the property market. – I-Net Bridge