07 Feb.
House price growth remains low and is slowing down.
The slowdown in nominal year-on-year house price growth, evident towards the end of 2011, continued in January 2012. On a monthly basis nominal price growth remained in negative territory up to the first month of the year. In real terms, i.e. after adjustment for the effect of inflation, house prices deflated further up to December last year against the backdrop of a consumer price inflation rate of 6,1 year-on-year (y/y) at year-end.
The slowdown in the pace of house price growth can be attributed to the combined effect of the following factors, which affect consumers and eventually impact housing demand, growth in mortgage finance and house price trends:
- After interest rates were cut by 50 basis points in late 2008 and another 450 basis points in 2009, rates were lowered by a further 150 basis points in 2010. Last year saw interest rates remaining unchanged, not providing any further stimulus to the housing market.
- Many consumers continued to experience some financial strain up to late 2011 against the background of a low level of household savings; rising consumer price inflation, impacting spending power; relatively high levels of household debt in relation to income; and damaged consumer credit records, affecting the accessibility of credit.
- Employment remained under pressure in the first half of 2011, improving only slightly in the third quarter of the year.
- Consumer confidence was relatively low in 2011 compared with 2010, especially in the second half of last year.
Understanding South African Financial Markets
By Cecilia van Zyl; Ziets Botha; Peter Skerritt; Ingrid Goodspeed, 3rd edition, 2009
The South African financial markets comprise a range of activities, participants and instruments. Conceptually, they are concerned with two principal sets of activities: the transfer and trading of money or other financial claims, and the transfer and trading of risk. Understanding South African financial markets provides a framework for classifying and analysing these markets within the context of a modern capitalist system. This title gives an overview of the operation of various institutions in the South African financial system, as well as of the different financial markets in the South African economy and the instruments traded in those markets. Topics covered include the role of the South African Reserve Bank, technical features associated with the money market, and corporate governance and risk management. Each chapter opens with study objectives and jargon is explained in lay terms. Relevant international and local market practices and norms are applied.
Average nominal price levels of houses in the various categories of the middle segment of the market were as follows in January 2012, with nominal and real price changes presented in the table on the next page:
- Small homes (80m²-141m²): R664 400
- Medium-sized homes (141m²-220 m²): R995 000
- Large homes (221m²-400m²): R1 559 800 …
Read more at Absa Property Research
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