Property Expectations for 2009

iAfrica reports that despite the expectations for lower interest rates and inflation, the outlook for the South African residential property market in 2009 remains bleak.

According to Jacques Du Toit, senior property analyst at Absa, activity in the market are set to stay subdued up to the second half of the year while price in the middle segment of the market may decline by as much as 2.5 percent in nominal terms this year.

This year might also see a further decline in house prices of up to 8%. This is based on projected consumer price inflation trends to drop in nominal prices.

The Absa House Price Index showed on Friday that nominal annual average house price growth in the middle segment of the market slowed down to below 4% in 2008. This was the lowest price growth recorded since 1996.

Because of declined inflation during this year, we might see prime and mortgage interest rates cut by a cumulative 300 basis points during the course of 2009 to reach a level of 12.5% by year-end. Economic conditions are expected to remain depressed for most of the year. In 2008 we saw a 3% real economic growth, but expect a poor 1% growth for 2009.

Last year’s 2.7% real disposable income growth is set to drop to 1.5% for 2009 and house prices are also expected to remain under pressure.

Du Toit said that we could expect some relief toward the middle of 2009, with levels of activity and prices only improving from 2010 onwards.

The information in this article is courtesy of iAfrica (Property in 2009 – 10 January 2009).

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