ABSA reports house prices rose by 14,2 % last year



House prices increased by 14,2 percent year-on-year last year to R358 000 for the average house, according to the Absa Quarterly Housing Review. Taking into account an average consumer price inflation rate of 10,1 percent in 2002, this, the bank says, represents a 3,7 percent increase in real terms. In the fourth quarter of last year, house prices increased by a nominal 13,9 percent (-0,5 percent real) to about R375 500. The average price of houses in the three different categories was as follows in 2002: Small houses (80m²-140m²): R246 500 (nominal 10,8 percent and real 0,6 percent higher than in 2001). Medium houses (141m²-220m²): R329 000 (nominal 12,8 percent and real 2,4 percent higher than in 2001). Large houses (221m²-400m²): R510 700 (nominal 17,8 percent and real 7 percent higher than in the previous year). The average building cost of new houses in the various categories increased as follows in 2002 compared with 2001: Small houses (80m²-140m²): 10,8 percent. Medium houses (141m²-220m²): 14,5 percent. Large houses (221m²-400m²): 15,7 percent. Building costs In the fourth quarter of last year, building costs increased by 14,4 percent compared with the same quarter in 2001. This contributed to the 23,4 percent year-on-year increase in the average price of a new house to about R528 900 in the last three months of 2002. In real terms, this represents an increase of 7,8 percent compared with the same period in 2001. The average price of an existing house increased by 12,8 percent year-on-year to about R356 300 in the final quarter of last year. This represents a real decline of 1,7 percent. The price differential between new and existing houses amounted to about R172 600, or 32,6 percent in that quarter. Luxury house prices declined by a nominal one percent on average in 2002. In real terms, this represents a price decrease of 9,9 percent. In the fourth quarter of last year, house prices in the luxury category declined by a nominal 0,2 percent and a real 12,8 percent, the largest decrease since the beginning of 1999. Price data in the luxury category is based on houses costing over R1,5 million in respect of which mortgage applications were approved by Absa. In 2002, the average price of affordable houses (40m²-79m² and priced at up to R100 000) increased by 4,8 percent compared with 2001. This is the largest price rise since 1997, when the increase amounted to 7,1 percent. However, in real terms, this nominal increase in 2002 represents a decline of 4,7 percent. Absa says interest rates (including the mortgage rate) can be expected to decline by a total of 300 basis points during 2003. Against the background of these macro-economic prospects, the housing market is expected to perform relatively well in 2003 and a nominal price increase of about 12 percent on average is forecast for the year. As soon as inflation starts declining, real house prices will begin to increase again, following the small 0,5 percent decline recorded in the fourth quarter of 2002. An average house price increase of about 4 percent in real terms is anticipated in 2003. Article: 24 February 2003 Rodney Hayter The Property Professional On-line Edition 61 email: hayter@icon.co.za