Housing in Southern Africa July 2016

Housing

Low house price growth May 2016 saw year-on-year growth in the average nominal value of middle-segment homes in the South African residential property market, slowing down from April. experienced by homebuyers on the back of tough macroeconomic conditions.

The average nominal value of homes in each of the middle- segment categories was as fol- lows in May 2016: • Small homes 80 m² - 40m² averages R947 000 • Medium-sized homes 141 m² - 220 m² averages R1 282 000 • Large homes 221 m² - 400 m² averages R2 010 000 Current trends and prospects for the economy in the household sector will impact the performance of the resi- dential propertymarket and property price growth. The economy contracted by 1,2% quarter-on-quarter and 0,2% y/y, measured by production, in the first three months of 2016. This has in- creased the risk of a recession, after two consecutive quarters of a con-

R eal price trends are important from a property investment perspective, as investors want to determine that their investments beat inflation. Trends in home values are according to Absa’s house price indices. According to Jacques du Toit, Absa Home Loans, Property Analyst, year- on-year nominal price growth of 5,7% recorded inmiddle-segment housing in May was slightly down from 6,1% in April. Year-to-date price growth till May was 6%. Current trends in house prices are as a result of financial pressure

traction in gross domestic product. Continued inflationary pressures and higher interest rates towards year- end will further erode consumers’ purchasing power. This will result in low consumer confidence and sub- dued growth in consumption expen- diture and credit extension. Against this background consumer credit-risk profiles and financial vulnerability, credit providers’ risk appetites and lending criteria may change. ■

July 2016