Absa forecasts 6 percent house price growth

House prices are continuing to improve. Absa Home Loans yesterday reported that the upward trend in nominal house price growth, which has been evident since the middle of last year, continued last month.

Prices for middle segment houses grew last month by 5.1 percent year on year from 4.6 percent in December.

Jacques du Toit, a senior property analyst at Absa, said yesterday that the results of the bank's latest house price index definitely showed a positive trend but the growth in house prices "is still very low compared to where we have come from".

Du Toit said nominal house price growth peaked during the most recent residential property boom at 35.7 percent in October 2004. The record for the monthly growth rate was set in May 1981 at 41.5 percent.

He said nominal house price growth averaged 32.2 percent in 2004, which was the second highest on record after the average 38.3 percent growth achieved in 1981.

Absa is forecasting average nominal house price growth of 6 percent this year.

Du Toit admitted this was not spectacular but a significant improvement on the negative 4 percent growth achieved in some months last year.

He said against the background of relatively high levels of debt, tight labour market conditions and pressure on disposable income, many households were still experiencing a fair amount of financial strain and these conditions were only expected to improve in the second half of this year.

Du Toit said the gradual recovery in the residential property market was expected to gather further momentum this year because of better economic conditions, the lagged effect of lower interest rates and less tight credit conditions.

"But we will not reach those levels of 30 percent-plus growth easily again, which were the result of the market correcting and recovering from many years of bad performance. In the years ahead, we can look forward to sustainable growth but nothing near those levels of a few years ago," he said.

Sapa

Posted at 10:18AM Feb 09, 2010 by Editor in Residential  |  Comments[0]