Absa’s latest house price index shows how much the average home costs in South Africa, and what lies ahead for the local property market.
Year-on-year growth in the average nominal value of middle-segment homes in the South African residential property market showed some improvement up to April 2016, according to the index.
However, in real terms – after adjustments for consumer price inflation – growth stayed flat.
According to Absa, the average nominal value of homes in each of the middle-segment categories in April 2016 was as follows:
- Small homes (80m²-140m²): R951,000
- Medium-sized homes (141m²-220 m²): R1,268,000
- Large homes (221m²-400m²): R2,008,000
The value of medium-sized homes in real terms has declined by 1.3% so far in 2016, while small homes have seen the biggest growth at 1.9%, Absa said.
Looking ahead, the residential property market is expected to reflect the tough economic conditions in South Africa, and how these will affect consumers, especially home owners.
Economic growth is forecast at 0.6% in 2016, while headline consumer price inflation expected to increase to a level of above 7% by year-end.
“The upward pressure on inflation, which will to a large extent be driven by a weakening exchange rate and rising food, fuel and electricity prices, is to cause further interest rate hikes in coming months. Prime lending and variable mortgage interest rates, currently 10,5% per annum, are forecast at 11% by the end of the year,” Absa said.
“These developments will negatively affect household finances, with credit-risk profiles, financial vulnerability and consumer confidence to come under further pressure, which may cause credit providers to adjust risk appetites and lending criteria accordingly.”