Mid range home prices increase

Prices of middle-segment homes in the South African housing market increased by a nominal 0.6% in 2012‚ after rising by 1.7% in 2011‚ according to the latest Absa house price index.

In real terms prices dropped by 5.4% year-on-year (y/y) in the first eleven months of last year‚ with real price deflation of 2.9% (y/y) evident in the corresponding period in 2011.

Nominal year-on-year price growth of 7.1% was recorded in December 2012‚ up from a revised 5.3% in November.

In view of current conditions in and prospects for the economy‚ the household sector and the residential property market‚ house price growth is forecast to remain relatively low in 2013 compared with growth of a few years ago.

Real annual house price deflation still occurred in the large-home segment up to November‚ with prices of small and medium-sized homes showing some real growth in the past two months.

The average nominal value of homes in each of the three middle-segment categories was as follows in December 2012:

• Small homes (80m²-140m²): R791‚100

• Medium-sized homes (141m²-220 m²): R1‚076‚700

• Large homes (221m²-400m²): R1‚559‚000

Absa property analyst Jacques du Toit says the forecast is for the South African economy to grow by a real 2.8% in 2013‚ after expanding by an estimated 2.5% in 2012. The country’s economic performance will this year still be affected by global economic trends and domestic developments and conditions.

Headline consumer price inflation remained below the 6% level up to late 2012‚ but some upward pressure was evident as a result of rising food prices‚ transport costs and property running costs. However‚ the forecast is for inflation to remain below 6% in 2013‚ with the result that interest rates are expected to stay at current levels in the next twelve months‚ notes Du Toit.