Is the South African property market turning a corner?

It seems as though there is light at the end of the tunnel for South African property buyers, with the latest Absa house price index showing positive indicators in certain parts of the market. The report showed year-on-year growth in average home values of the middle housing segment reached an upper turning point in Q1 2013, while low interest rates are making real estate more affordable. This means the market is becoming more attractive for a wider range of investors.

The Absa house price index is based on applications for mortgage finance in respect to middle-segment small, medium-sized and large homes. It tracked 11.8 per cent year-on-year growth in the middle segment in March, after a 10.9 per cent rise in February. Real price growth stood at 4.8 per cent annually in February, after adjustment for the effect of consumer price inflation, which was recorded at 5.9 per cent. Average nominal value of homes in each of the three middle-segment categories stood at R752,600 (small), R1,079,500 (medium-sized) and R1,609,600 (large).

Economic conditions also helped to keep prime and variable mortgage interest rates stable at 8.5 per cent per annum. Rising fuel prices and a weaker rand exchange rate have been driving inflationary pressure for headline consumer prices. The South African Reserve Bank expects inflation to average 6.3 per cent year-on-year in Q3 2013, before slowing to more than five per cent in Q4 2014. The repo rate stood unchanged at five per cent per annum. This stands against the background of an expected real economic growth rate of 2.7 per cent in 2013 and an inflation average of six per cent.

Absa explained: "Nominal year-on-year house price growth appears to be peaking in some categories of the middle-segment of the market, influenced by market conditions and slowing month-on-month growth in the past few months. Nominal price growth for the full year is forecast to be in single digits, with real price trends to be driven by a combination of nominal price movements and consumer price inflation."

Article from: www.propertyshowrooms.com

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