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House prices expected to fall by 3 - 4%

By Adele Shevel and Simpiwe Piliso | Jun 09, 2009 | COMMENTS [ 0 ]

HOUSE prices could decline by 3 percent to 4 percent this year in nominal (actual) terms. This is according to Absa, which has about a third of the mortgage market and is the largest home loans provider in SA.

In real terms (less inflation), prices are forecast to drop for a second consecutive year according to the house price index released yesterday by the bank.

House prices in the middle segment dropped by 3,6 percent in May in nominal terms from the previous year to an average of R932 000, the biggest price drop since late 1986.

In real terms, house prices are down by 9,7 percent from January to April. This continues the trend of nominal year-on-year price deflation, which started in December. In real terms, prices continued to decline on a year-on-year basis since January last year.

In the small house sector (80m² to 140m²) the average nominal price declined by 4 percent in May from the same month last year, with an average price of R658  200.

Medium-sized houses (141m² to 220m²) now cost about R930 000, having dropped by 2 percent in May.

The average price of a large house is R53 200 below the peak of R1,39 million reached in March last year. The average nominal price of large houses (221m² to 400m²) dropped by 3,5 percent in May from last year.

Absa analyst Jacques du Toit said the residential market is expected to stay depressed until late this year.

Meanwhile, a shortage of middle-income homes exists in the Eastern Cape, particularly in Port Elizabeth, East London and Mthatha. Hanlie Bassingthwaighte, manager of Pam Golding Properties in the region, said their office concluded 133 sales worth R187   million in 12 months.

Even Mthatha, one of SA's poorest cities, is cashing in on the boom. Allan Moyce of Rens & Leonard, an East London firm of valuers, said the highest price fetched for a home in Mbuque, an Mthatha suburb,was R700000. The average price is R343200.

Some agents have put the average higher price down to the property shortage, but according to sales figures provided by the compilers of the SA Property Transfer Guide, the highest price fetched last year was R4,5million for a 1347m² home in Myezo.


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