Residential property prices drop for first time in 8 years
House prices fell for the first time in eight years, pushing the average house price for March down to R550000 from R570000 the month before.
Standard Bank's Residential Property Gauge released yesterday showed the fall reflected a year-on-year decline of 5,2percent growth in the average pricing of residential properties.
Residential property prices have last seen a brief decline of 2,5percent in June 2000. But, Standard Bank said the market is simply correcting itself.
Sizwe Nxedlana, an economist at Standard Bank, said the residential property market was going through a period of softer pricing conditions, with a sub-stantial decline in demand for properties.
Nxedlana added that data from the Reserve Bank on new mortgages granted and readvances showed that after peaking to R40billion in June 2007, the market had halved to around R20billion.
He said: "The reduction in demand, in turn, is due to substantial reduction in affordability brought on by inflation, which is eroding household disposable incomes.
"Higher interest rates lead to higher instalment payments, and the fact that property prices have also gone up since 2004 have made residential property too expensive.
"Affordability seems to have deteriorated even in the declining interest rate environment bet-ween 2004 to 2006."
He added that the latest bout of the monetary policy tightening had merely worsened the lack of affordability.
"Looking forward, the current prospects, in the short term, suggest property prices could continue to record low growth until the economy begins to improve."