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Property Prices in South Africa Continue to Stagnate

Articles about home loans / property in South Africa > Property Prices in South Africa Continue to Stagnate

Reduced affordability had caused house price increases to stagnate, Standard Bank economist Sizwe Nxedlana. Nxedlana said the slowdown in the demand for residential property in the form of a noticeable reduction in the volume of mortgages granted and the stagnation in house price growth were primarily a function of reduced affordability.

"The 400 basis points increase in interest rates between June 2006 and December 2007 in an environment of record-high household indebtedness has placed the South African consumer under strain." Nxedlana stressed that evidence that consumers were under pressure had not only become manifest in weaker demand for housing and house price growth, but in reduced spending as well. He said the short-term outlook for residential property remained bleak. Standard Bank's median house price index at R570 000 last month recorded a zero year-on-year growth rate for the third consecutive month.

Excluding the National Credit Act-induced outlier of R620 000 in June last year, the monthly Standard Bank medium house price has been "range bound" between R550 000 and R599 000 since December 2006. Nxedlana said the rigidity of the medium house price in this range; the stagnation of house price growth and the lower demand for housing highlighted the headwinds facing residential property. There had been a downward shift in the lower-quartile house price and an upward shift in the upper-quartile house price, he said. The lower quartile is the value below which 25 percent of the sample data falls while the upper quartile is that above which the upper 25 percent of the sample data lies.

"The lower quartile house price on our mortgage book was R350 000 in February 2007 and declined to R300 000 in February 2008. The upper quartile house price increased from R880 000 in February 2007 to R960 000 in February 2008 with the median house price intact at R570 000. A similar trend was evident when comparing the quartiles for January 2007 and January 2008," he said. Nxedlana said increased public sector fixed investment would improve the performance of the economy in the medium term, with positive consequences for consumer spending and residential property.

Published By: Business Report


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