Have We Reached the Bottom?

The information in this article is courtesy of iAfrica (Almost, but not quite – 6 August 2009)

According to Absa’s House Price Index for July, the houses price deflation may be bottoming out.

According to Absa analyst, Jacques du Toit, South African house prices have been deflating since late 2008. However the trend seems to be near the turning point on a year-on-year basis, while month-on-month deflation has also slowed down further in July after bottoming out in March this year.

House prices in the middle segment of the market were down by 4.2% year-on-year to R925 100 in July, following a decline of 4.1% year-on-year in June.

Houses prices were 0.2% lower in July on a month-on-month basis, compared to a decline of 0.4% recorded in June.

According to du Toit, this means that the average nominal price for middle segment houses were at their lowest level in July since the second quarter of 2007.

He added that although the South African economy is currently in recession, we could expect the bottom of the cycle and gradual recovery toward the second half of the year. Du Toit also predicts that house price will continue to decline, but the pace of the decline was also suspected to slow down during the second half of this year.

The projected price decline for this year stands at between 3 and 3.5% after last year’s 3.7% price increase.