Real estate market is on recovery

THE real estate market showed further signs of sustainable recovery with an uptick in both property sales and rentals last month.

Absa's house price index showed that the average nominal value of small, medium and large houses was up by 15,2 percent year-on-year in May. This resulted in an average house price of about R1,08million in the middle segment on the back of 14percent y-o-y growth in April.

Absa senior property analyst Jacques du Toit says: "The continued strong growth in the average value of smaller and more affordable housing is believed to be related to affordability issues.

"After a marked improvement in the affordability of housing over the past two years on the back of house price and interest rate trends, housing affordability appeared to have turned around in the late 2009."

FNB's house price index for May showed a similar pattern with price inflation accelerating to 11,9percent from April's 10,1percent y-o-y growth. This, according to FNB, was the result of the 5,5percent percentage point drop in interest rates since June 2008.