House prices in free fall

Adele Shevel

Adele Shevel

House prices have had the biggest decline since late 1986, shedding 2,7percent last month from the same month the previous year.

Absa, which has about a third of the total mortgage market in South Africa, said yesterday that the average nominal price of middle-segment housing dropped to R941000.

This was the biggest drop since November 1986 when prices declined three percent from the same month the previous year.

House prices were 0,4percent lower this past April than in March. As has been the case in recent months, house prices were down the most in the large category in April on a year-on-year basis, while the small category posted the smallest decline.

This indicates the strain experienced in the market for larger and more expensive properties, with buyers focusing on smaller and more affordable homes.

The average nominal price dropped four percent in large houses to about R340700 in April from a year ago.

This was the biggest nominal year-on-year price decline since September 1985.

The average nominal price of medium-sized houses dropped 3,2percent in April year on year. The average price in this category is now around R918000.

Small houses now average about R677000, down one percent. This came after it declined by a revised 2,3percent in March from the previous year.

Jacques du Toit, a senior property analyst at Absa, said economic conditions such as a poor performing economy, job losses, declining real household disposable income, sentiment and confidence was driving the decline in house prices.

Interest rates have been cut 3,5 percentage points in the past five months to 8,5 percent. Du Toit says the effect of these will probably be felt in the second half of the year as rates always work through with a lag.

South Africa is on the brink of its first recession in 17 years. The International Monetary Fund said last month it expected South Africa's economy to shrink 0,3percent this year.

Earlier this week FNB said house prices had fallen to levels last seen in December 2006.

'House prices have fallen to levels last seen in December 2006'