Steady growth for middle-segment homes

Private Property South Africa
Tahir Desai

growthJanuary 2015 saw year-on-year growth in the average nominal value of middle segment homes in the South African residential property market remaining relatively stable from late last year.

Nominal house price growth of 9,5% was registered in January, slightly down from 9,7% and 9,8% recorded in December and November respectively

The continued above-inflation growth in house prices is regarded as a relative good performance against the background of persistent challenging economic conditions and low confidence levels.

However, largely normalised demand and supply conditions in the residential property market are believed to be a major supporting factor to price growth.

The average nominal value of homes in each of the middle-segment categories was as follows in January 2015:

• Small homes (80m²-140m²): R880 000

• Medium-sized homes (141m²-220 m²): R1 204 000

• Large homes (221m²-400m²): R1 850 000

Currently consumer price inflation is under downward pressure against the background of low international oil and domestic fuel prices. However, the major risks to the inflation outlook remain the oil price, the rand exchange rate and above-inflation wage hikes, whereas productivity growth is low.

Headline consumer price inflation is forecast to dip below the 4% level this year, with interest rates expected to stay at current levels until later this year. Consumers are currently benefitting from the significantly lower fuel prices, which will be supportive of domestic demand and economic growth.

Single-digit nominal house price growth is expected to continue in 2015 against the background of the outlook for major economic and household sector-related factors, although base effects may cause price growth to be slightly lower compared with 2013 and 2014 when price growth of 10% and 9,3% respectively was recorded.

Based on current expectations regarding nominal house price growth and consumer price inflation, continued real price inflation is projected for this year, after real price growth was recorded in both 2013 and 2014.

Source: ABSA Property Research

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