Jul 09, 2012
Compiled by Jacques du Toit Property Analyst Absa Home Loans 45 Mooi Street Johannesburg | 2001 PO Box 7735 Johannesburg | 2000 South Africa Tel +27 (0) 11 350 7246 jacques@absa.co.za www.absa.co.za
House price indices
House price growth stabilising
9 July 2012
According to the Absa house price indices, which are based on the average value of homes for which the bank received and approved applications for mortgage finance in the small, medium-sized and large categories in the middle segment of the market (see explanatory notes), year-on-year price growth in the South African housing market appears to be stabilising after a period of some price declines. The segments of medium-sized and large housing showed some stable nominal year-on-year price growth in May and June this year, although remaining at a relatively low level. The small segment was still locked in price deflation up to June, but the pace of deflation continues to slow down. On a month-on-month basis prices have been on a gradual upward trend in the small and medium-sized segments over the past four to five months, impacting year-on-year price growth. In the category for large housing only some marginal price deflation still occurred in June compared with May. In real terms, however, house price deflation continued up to May this year, but the momentum is slowing down against the background of the abovementioned trends in nominal price growth as well as a lower headline consumer price inflation rate, which, at 5,7% year-onyear (y/y) in May, is again back within the inflation target range of 3% to 6%, after reaching a level of 6,3% y/y in January this year.
Explanatory notes: The Absa house price indices, available back to 1966, are based on the total purchase price of houses in the 80m²400m² size category, priced at R3,6 million or less in 2012 (including improvements), in respect of which mortgage loan applications were received and approved by Absa. Prices are smoothed in an attempt to exclude the distorting effect of seasonal factors and outliers in the data. As a result, the most recent index and price growth data may differ materially from previously published figures.
Absa house price indices (nominal, 2000=100)
Month 2010 January February March April May June July August September October November December Average 366.8 379.3 391.3 400.5 404.5 402.5 396.5 389.6 384.5 382.3 382.5 383.5 388.6 Small houses 80m²-140 m² 2011 383.8 382.6 380.4 378.3 377.4 377.2 376.6 373.8 367.9 359.1 349.2 340.1 370.5 337.0 2012 334.5 332.9 334.1 336.8 340.3 343.7 Medium-sized houses 141m²-220 m² 2010 384.5 389.1 392.0 392.7 391.7 389.2 386.7 385.2 385.1 385.9 386.9 387.5 388.0 2011 387.3 387.2 387.9 390.1 393.4 397.3 400.8 402.4 401.9 399.4 395.6 391.6 394.6 393.9 2012 389.3 389.2 391.1 394.2 397.7 401.8 2010 391.4 394.4 397.7 400.2 401.0 399.9 397.4 394.9 393.7 394.4 396.9 400.3 396.9 Large houses 221m²-400 m² 2011 403.6 405.6 406.3 405.7 404.8 404.7 406.1 408.8 411.9 414.1 414.7 413.7 408.3 407.3 2012 411.5 409.1 407.1 405.9 405.2 405.0
The information in this publication is derived from sources which are regarded as accurate and reliable, is of a general nature only, does not constitute advice and may not be applicable to all circumstances. Detailed advice should be obtained in individual cases. No responsibility for any error, omission or loss sustained by any person acting or refraining from acting as a result of this publication is accepted by Absa Group Limited and/or the authors of the material.
Absa Bank Limited, Reg No 1986/004794/06, Authorised Financial Services Provider, Registered Credit Provider Reg No NCRCP7
The average nominal value of homes in each of the three middle-segment categories was as follows in June 2012, with nominal and real price changes presented in the table and graphs below: Small homes (80m²-141m²): R684 600 Medium-sized homes (141m²-220 m²): R1 003 900 Large homes (221m²-400m²): R1 475 200
Outlook
The South African economy is forecast to grow at a real 2,6% in 2012, after growing at 3,1% in 2011. The some lower growth expected in 2012 will largely be the result of global economic developments, specifically against the background of trends in and prospects for the Eurozone economy. Consumer price inflation, currently at 5,7% y/y and positively impacted by lower food price inflation, is expected to average 5,8% this year compared with 5% in 2011. In view of these economic growth and inflation projections, the baseline interest rate forecast is for rates to remain unchanged until late 2013 before being hiked to keep inflation in check. Prime and variable mortgage interest rates, currently at a 38-year low of 9%, are forecast to be on a gradual rising trend from late next year, peaking at 11% by the end of 2014. However, based on the near-term outlook for inflation and the economy, the possibility of a further interest rate cut has increased, although the rand exchange rate remains a major risk to the inflation outlook. House price growth in the South African residential property market is expected to remain relatively low over the short to medium term, set to be affected by economic developments impacting household finances, consumers' risk profile, levels of confidence and housing demand and supply. These factors are expected to be reflected in property buying patterns, the demand for and the affordability and accessibility of mortgage finance. Based on Absa's calculations, house prices are forecast to continue to deflate in real terms in the rest of 2012, which will be the result of trends in nominal prices and headline consumer price inflation towards the end of the year.
Absa house price indices
Houses of 80m²-400m², up to R3,6 million Category of housing Small houses (80m²-140m²) Medium-sized houses (141m²-220m²) Large houses (221m²-400m²) Nominal year-on-year % change May 2012 -9.8 1.1 0.1 June 2012 -8.9 1.1 0.1 Year-to-date 2012 -11.3 0.9 0.5 Real year-on-year % change April 2011 -16.1 -4.8 -5.7 May 2011 -14.7 -4.3 -5.3 Year-to-date 2012 -16.8 -4.9 -5.1
Absa house price index
Houses of 80m²-400m², up to R3,6 million 40 35 30 25 20
%
15 10 5 0 -5 -10 -15 04 05 06 07 08 09 10 11 12
Nominal y/y % change
Real y/y % change
2
Absa house price indices
Nominal y/y % change 40 35 30 25 20 15
%
10 5 0 -5 -10 -15 -20 04 05 06 Small 07 08 Medium 09 10 11 Large 12
Absa house price indices
Real y/y % change 40 35 30 25 20 15 10 % 5 0 -5 -10 -15 -20 -25 04 05 06 Small 07 08 Medium 09 10 Large 11 12
3
