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| Housing Review 1st Quarter 2008 |
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Property Trends - Housing Review
The South African economy expanded by 5,1% in real terms in 2007, mainly as a result of strong growth in the financial, real estate and business services sector.
During the course of 2007 the household sector was affected by rising inflation, higher interest rates and the implementation of the National Credit Act (NCA). The cost of servicing household debt increased to above 10% of disposable income, real disposable income growth slowed towards the end of the year, and real consumption
expenditure growth tapered off to lower levels.
Nominal and real house price growth slowed down further towards the end of 2007, largely as a result of the tightening of monetary policy since mid-2006, stricter requirements for credit extension implemented in the second half of last year, and housing having become less affordable, putting pressure on household finances.
The average price of affordable housing increased by 19% in nominal terms to R258 000 on average in 2007, compared with a growth rate of 14,9% recorded in 2006. Real price growth came to 11,2% last year, up from 9,7% in 2006.
Nominal price growth of 14,5% was recorded in middle-segment housing in 2007 (15,2% in 2006), causing the average price of a house in this market segment to come to about R929 000 last year. In real terms, middle-segment house price growth of 7,0% was
registered in 2007, down from 10,1% in 2006.
In the luxury segment of the market, house prices increased by a nominal 8,1% to about R4,1 million last year (10,9% in 2006). The average price of houses in this category increased by a real 1,0% in 2007 compared with a real growth rate of 6% recorded in 2006.
At a provincial level, nominal year-on-year growth in house prices in the middle segment of the housing market varied between 8,0% and 20,7% in 2007. Real prices increased by between 0,9% and 12,8% last year, compared with 2006.
In the countrys major metropolitan areas, nominal house price growth of between 10,6% and 22,5% was recorded in 2007. Real price growth in these areas varied between 3,3% and 14,5% last year, compared with the previous year.
In the coastal regions, nominal growth in house prices varied between 15,7% and 19,3% in 2007, while real growth of between 8,1% and 11,5% was recorded.
Inflation is forecast to remain under upward pressure over the short term, with the result that interest rates are not expected to be cut soon.
The situation with regard to electricity supply is set to affect levels of production, fixed capital formation, employment, income and consumption in the economy, eventually impacting the housing market.
Nominal house price growth of 7,8% is projected for 2008, resulting in expected real growth of just 0,1% this year after adjustment for inflation.
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