Pressure on House Prices to Continue

The information in this article is courtesy of The Times (Absa mid house prices slide 3.6% y/y – 8 June 2009)

Absa announced yesterday that the average nominal price of middle-segment housing was down by 3.6% year-on-year to R932,000 in May 2009. April 2009 showed a decline of a revised 3.2% y/y.

This is the biggest decline since September 1986 when it was also –3.6% y/y.

Compared to April, nominal houses prices were 0.5% lower in May on a month-to-month basis. This contributed to nominal houses prices in the middle-segment being R35,300 lower in May 2009, after peaking at R967,300 in May last year.

Middle-segment house prices were down by a real 10.7% y/y in April, after declining by a revised 10.2% y/y in March. This was the biggest real year-on-year decline since September 1992.

These calculations are based on the consumer price index (CPI) for all urban areas, available from January 2008 as published by Statistics South Africa. These figures are also used by the monetary committee for policy purposes.

Absa also announced that small house prices dropped by 4.0% y/y in May, after 3.2% y/y was recorded in April of this year. This brings the average price for small houses to R658,200.

The average nominal price of large houses declined by 3.5% y/y to around R1,344 million in May this year, after declining by a revised 3.6% y/y in April. This means that the average price of a large houses now stands at R53, 200 below the peak of R1,398 million reached in May last year.

Other sectors like the construction sector are performing relatively well however developments are believed to record negative real growth for the full year.

According to Absa the residential property market is expected to remain under pressure until late 2009.