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SA house price growth of 13,3% slips to 80-month low   Article Date :9 Oct 2006 Absa, reports nominal year-on-year house price growth rate Absa, South Africa’s largest mortgage lender, reports a nominal year-on-year house price growth rate of 13,3% for September compared to a revised growth rate of 13,9% in August. This, the bank notes in its October 4 Absa House Price Index, was the lowest year-on-year growth since January 2000 when it was 11,8% and brought the average price of a house in the middle segment of the market to about R824 700 in September. The average nominal year-on-year growth in house prices came to 14,9% in the first nine months of 2006. In real terms, year-on-year growth of 8% was recorded in August compared with a revised growth rate of 8,8% in July, based on the headline consumer price index. This was the lowest real year-on-year growth since February 2003 when it was 8,1%. The average real year-on-year growth in house prices came to 10,5% in the first eight months of 2006. On a month-on-month basis, nominal growth in house prices was 0,7% in August compared with a revised growth rate of 0,9% in July. On a month-on-month basis, house prices rose by 0,1% in real terms in August after no month-on-month growth was recorded in July. Absa says inflationary pressures are still mounting in the economy with PPI inflation, food prices and CPIX inflation increasing further and the rand exchange rate significantly weaker against the major international currencies. “However, domestic fuel prices dropped sharply in October, which will temper inflationary pressures to some extent. August’s growth in private sector credit extension (25% year-on-year), especially growth in mortgage advances (30,3% year-on-year) remained high. “These are some of the factors the South African Reserve Bank’s Monetary Policy Committee (MPC) will consider next week when deciding on the way forward for interest rates. It is expected that rates will be hiked by at least 50 basis points at next week’s meeting and another 50 basis point increase is projected for December, with this pace of rate increases to be maintained into the first half of 2007. In the remaining few months of 2006 nominal house price growth is projected to continue its declining trend to register growth of between 13% and 14% for the full year, compared with a growth rate of 22,9% recorded in 2005. The expectation is for nominal year-on-year house price growth to be in single digits by late 2006/early 2007. Nominal year-on-year price growth of between 7% and 8% is forecast for next year, which will be the lowest since 1999 when it was 4,6%. CLICK HERE TO RETURN TO THE MAIN NEWS PAGE