Based on year–on–year growth, the average value of small, medium and large houses in the South African market continued to show relatively low growth according to Jacques du Toit, ABSA Senior Property Analyst. The current low level of year–on–year price growth is largely due to the base effect of a recovery in home values twelve months ago and will continue to be a factor in the first six months of this year. Low inflation and interest rates, a decrease in unemployment numbers towards the end of 2010 and a higher level of real economic growth contributed to a moderate growth in month–on–month price across all three segments and townhouses for sale since the late part of last year.
The price of medium-sized houses declined in real terms over the last three months compared to twelve months ago, while the trend for large houses shows a decline over the last seven months when comparing to the same period twelve months prior. The headline consumer price index is used when calculating house prices in real terms.
Small-size houses (80–141sqm). Average price R784 600. Nominal growth y/y for February = 4.3%. (January = 6.3% y/y) Real price growth for January = 2.6% y/y.
Medium-size houses (141-220sqm). Average price R982 200). Nominal growth y/y for February = 1.5%.( January = 2.1% y/y) Real price decline for January = 1.5% y/y.
Large-size houses (221-400sqm). Average price R1 494 600. Nominal growth y/y for February = 3.7% (January = 3.5% y/y). Real price decline y/y for January = 0.2%y/y.
The South African economy is forecast to grow between 3.5% and 4% in real terms this year.
The residential property market, which include townhouses for sale, is expected to be supported by rates remaining low, the lowering of transfer duty and a moderate growth in employment however consumer price inflation is set to increase on the back of international oil prices, exchange rates, a fuel tax of 18 cents/liter, (expected in April) and an increase in food price inflation. Added to this, household finances will be further impacted by increases in the cost of electricity as well as rates and taxes, which will ultimately impact on the residential property market.
Taking the above into account as well as recent trends in house prices, the current forecast in nominal house price growth is around 1.5% for 2011. Based on the average consumer price inflation rate of between 4.5% and 5% this year, house and townhouses for sale prices are set to decline further in real terms during 2011.