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Standard Bank's median house price fell to R530 000 in April from R550 000 in March, the bank said on Monday.
The April median house price of R530 000 translated into a negative growth rate of -8,6 percent year-on-year when compared to the median house price recorded in April 2007.
The five month moving average growth rate declined to 2,8 percent year-on-year in April.
However, recent point estimates for house price growth should not be taken at face value and should be interpreted with caution as they were subject to certain distortions, the bank said.
A relatively high base value from which the latest and pending year-on-year growth rates were calculated was established last year.
"The establishment of the high base was primarily due to the temporary upward adjustment in the distribution of mortgages entering our home loans book in the months leading up to the introduction of the National Credit Act (NCA)," Standard Bank said.
The uncertainty preceding the implementation of the NCA incentivised the prioritisation and increased the urgency by market participants of concluding higher-valued housing transactions in order to circumvent the possibility of stricter lending standards post implementation.
"The distortive base effects may continue to impact the point estimates of the monthly median house price in May, June and possibly July, suggesting the possibility of further deep negative year-on-year growth rates in those months," the bank said.
However, the overall downward trend in house price growth was still reflective of the sharp fall in demand due to the reduction in housing affordability, the bank said.
"In our view, the risk of national house price deflation has increased further and there are areas that are possibly already experiencing price deflation albeit from a high base. Houses are increasingly being sold at below the initial asking price and are staying on the market for longer and there is increasing anecdotal evidence of a rise in distress selling and housing stock for sale."
This suggested that sellers had to revise their price expectations downwards placing downside risk to house prices.
"The recent trends in South African house price growth, when compared to trends in the US, could at first glance seem ominous for the outlook for South African residential property," Standard Bank said.
Comparisons were now being made between the subprime induced housing recession in the US housing market and the current challenging conditions facing the SA housing market.
However, the bank's analysis of the sources of the recession in the US housing market and its subsequent transmission mechanism to the rest of the US economy suggested that South African residential property "will experience a relatively mild cyclical downturn rather than a full blown recession." - Sapa