Roy Cokayne

THE year-on-year growth in middle segment house prices increased to 9.1 percent last month from a revised 7.4 percent in December but the growth is expected to moderate during the year, according to Absa.

Absa Home Loans property analyst Jacques du Toit said on Friday that the continuation in the upward trend in house price growth occurred against the background of the base effect of slowing house price growth and even price deflation in some segments of the market 12 months ago.

He said month-on-month price growth continued to slow down, which was expected to show up in a moderation in the annual price growth during the course of the year.

House prices adjusted to take account of the effect of inflation increased 1.7 percent year on year in December after real price deflation was recorded for most of last year.

These trends in Absa’s house price index are based on applications for mortgage finance received and approved by the bank for small, medium and large houses in the middle segment of the house market, which are houses between 80m2 and 400m2 in size priced at R3.8 million or less this year.

The growth in house prices reflected in the index is significantly higher than that in FNB’s house price index.

FNB reported last week that its index continued its “mild short-term dip” last month, declining further by 2.3 percent in January from a revised year-on-year decline of 1.1 percent in December.

The index is based on homes financed by FNB with an area of between 200m2 and 4 000m2 and in a price range between R20 000 and R10 million.

FNB household and consumer sector strategist John Loos attributed the decline in house prices to three causes. He said a high base effect had come into play because of a healthy price growth surge early last year as the residential market showed significant strengthening at that stage, which had a negative impact on the year-on-year growth rate a year later.

There also appeared to have been relatively healthier transaction volumes at the lower price end of the market. And the deterioration in economic growth in the second half of last year was bound to slow growth in residential demand in the latter stages of last year as household disposable income growth also slowed.

Loos said FNB still believed there would be slow but positive house price growth this year of about 2.5 percent.