house prices drop
Roux van Zyl
Roux van Zyl
Homeowners have been warned to expect their properties to start losing value for the first time in nearly 10 years.
This bleak outlook was delivered in Absa's Housing Review for the first quarter of this year which showed that real house price growth slowed to an annual rate of 3,5percent - down from nine percent in the fourth quarter of last year.
It was backed up by Standard Bank's median house price index which fell to R520000 in May from R599000 during the same month last year.
Absa senior property analyst Jacques du Toit said the main driver behind the price decrease was the high inflation rate, which has been pushing interest rates and home loan repayments up.
If Absa's real house price growth contracts to -1,5percent, a house valued at R1million could be worth R985000 by year end.
Standard Bank's April Property Gauge said the year-on-year growth rate was indicative of a downward trend in house price growth, which was due to falling demand caused in part by the fact that buyers could afford less. It said sellers could not expect to sell property today for what they could have sold it for 20 months ago.
According to a survey of estate agents in FNB's Property Barometer rising interest rates remained the residential property market's "public enemy number 1" during the first quarter of this year.
Pessimism about the current economic downturn was the second biggest property price damper, with the National Credit Act being relegated to third place.
"It all makes for a pretty bleak picture in 2008 at least, and even probably for 2009. Under such conditions, I am now of the belief that we will experience a period of national house price deflation in the not too distant future, on the back of very weak residential demand conditions," FNB's property strategist John Loos said.
On the bright side, however, Du Toit said the second half of this year and in 2009 will be the best time to buy property, especially from an investment point of view. - With Xolile Bhengu