Housing in Southern Africa June 2016

Housing

T here is some uptick evident in middle-segment house price growth – according to Absa Home Loans Property Analyst, Jacques du Toit. Year-on-year growth in the average nominal value of middle-segment homes in the South African residen- tial property market showed some improvement up to April 2016. Year-on-year nominal price growth in middle-segment housing was recorded at 7,1% in April, slightly up from6,8% in March. Real price growth came to 0,5% year-on-year (y/y) in March, after some real price deflation of 0,6% y/y in February. The uptick in house price growth was driven by the segment for small housing, with the categories of medi- um-sized and large housing showing relatively stable price growth in the first four months of the year. The accelerating price growth in the small-housing segment since the end of last year are the result of the base effect of sharply declining price growth in the corresponding period a year ago. Price growth in this segment of the market may also be supported by increasing financial strain on home- Growth in house prices

to a large extent, be driven by a weak- ening exchange rate and rising food, fuel and electricity prices and further interest rate hikes in coming months. Prime lending and variable mortgage interest rates, currently 10,5%per an- num, are forecast at 11% by the end of the year. These developments will nega- tively affect household finances, with credit-risk profiles, financial vulner- ability and consumer confidence to comeunder further pressure. Thismay cause credit providers to adjust risk appetites and lending criteria. “House price growth is forecast to show a marked slowdown towards year-end. This comes on the back of trends and the outlook for the economy and household finances, with some real price deflation pro- jected as a result of expected nominal price growth and inflation trends,” du Toit concludes. ■

buyers, causing a stronger focus on affordability and buying smaller-sized properties. The average nominal value of homes in each of the middle- segment categories for April: • Small homes (80 m² - 140 m²): R951 000 • Medium-sized homes (141 m² - 220 m²): R1 268 000 • Large homes (221 m² - 400 m²): R2 008 000 Du Toit says that the residential prop- erty market is expected to reflect the increasingly tough economic condi- tions and the impact of these on con- sumers and homeowners. Economic growth is forecast at a much subdued 0,6% in 2016, with headline consumer price inflation ex- pected to increase to a level of above 7% by year-end. The upward pressure on inflationwill,

June 2016