ABSA Quarterly Review



House prices up by 12,2% Against the background of a rise in inflation to a three-year high of 8,9 percent and interest rate development, house prices increased by 12,2 percent year-on-year to about R334 600 in the second quarter of 2002. This the ABSA Quarterly Review for the period says represents a real increase of 3,5 percent taking into account an average 8,4 percent consumer price inflation rate for the second quarter of the year. The sustained strong performance of house prices thus far this year led to an average year-on-year price increase of about 12 percent (4,6 percent real) in the first six months, despite rising inflation and interest rates. A combination of factors probably led to this strong price performance. These include the following: · Personal tax relief announced in the budget; · A reduction in transfer duties; · Higher increase in disposable income; · Relatively weak exchange rate boosting foreign purchasing; · More buyers from disadvantaged communities entering the formal market; · Stiff competition for business between banks; · Lack of new residential property and a general expectancy that rates will not reach 1998 record levels and no further increases anticipated in the immediate future. The average price of houses, according to Absa, in the three different categories rose as follows during the second quarter of 2002 compared with the same quarter of 2001. · Small houses (80sm-140sm): 10 percent nominal and 2,3 percent real; · medium-sizes houses (141sm to 220sm): 12,1 percent nominal and 3,4 percent real; · large houses (221sm - 400sm): 13 percent nominal and 4,3 percent real. Calculated year-on-year, second quarter regional house prices in all three categories performed relatively well compared with a year ago. Only in Gauteng (17,2 percent) were price rises higher than those for the country as a whole (12,2 percent) recorded, whereas average house prices increases in provinces such as the North West (4,6 percent), the Eastern Cape (7,4 percent), the Free State (8,1 percent) and the Western Cape (8,1 percent) were considerably lower. In view of these relatively low nominal price increases and an average inflation rate of 8,4 percent during the past quarter, house prices in these provinces declined in real terms. Article: 31 July 2002 Rodney Hayter The Property Professional On-line Edition 49 email: hayter@icon.co.za