High rates set to slow house price growth

The average house cost R942800 last month, 14,6percent more than the same month a year ago, Absa data showed.

The average house cost R942800 last month, 14,6percent more than the same month a year ago, Absa data showed.

Absa senior economist Jacques du Toit said the country's biggest mortgage lender forecasts house price inflation will slow to 10percent next year as higher interest rates bite.

He said that average growth for 2007 was forecast at 14percent, which was in line with his forecast in May.

This projected slowdown comes after house prices grew at an astronomical 22,7percent in 2005. The declining trend then took route the next year as growth averaged 15,3percent in 2006. This decline is now likely to extend over a minimum of three years before picking up again.

The Absa projections come after they recorded August house price growth at a lower 14,6percent year-on-year from 15,1percent in July and 15percent in June.

Many analysts also point out that the implementation of the National Credit Act may affect growth in mortgage advances.

Absa's house price index is based on the total purchase price of houses in the 80m² to 400m² size category, valued at R2,7million or less in 2006, in respect of which loan applications were approved by Absa.

Standard Bank reported median house price inflation for August was 5,7percent from the same month last year.

Last month Standard reported that median house prices had declined in July because of a backlog caused by hick-ups introducing the National Credit Act in June. Standard has revised July's figure to a 10,4percent increase from a year ago. - I-Net Bridge

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