House Prices Shrinking Fast

This article is courtesy of Realestateweb (House prices fall even faster than expected – 2 March 2009)

Worrisome statistics show that the value of your home is 7% less than last year this time – and it is bound to get even worse. More shocking is the fact that this situation is a result or a decline in demand back in 2007, making one wonder what a recession might do to property values.

February saw house price deflation gather momentum, from a January revised rate of -4,7% to – 6,9% last month according to FNB home loans strategist John Loos. He recons the decline is not far off 12%.

FNB believes the prime interest rate could be down to around 11% before the end of the year, which should stimulate demand in a credit driven market. However. they also believe that the house price deflation will probably get worse before it gets better.

The average house price according to FNB sits at R706 000 in February 2009 while February 2008 saw the average house price at around R758 000. The longer-term picture looks better, with the average house price in February 2001 at R269 000, about R415 000 in February 2004 and climbing to R617 000 by 2006.

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