South African House Prices move downhill

  • 17 years ago
  • Uncategorized
South Africa is witnessing a slowdown in current house prices largely due to higher interest rates and rising debt. The prices continued to slow down through April 2007.
According to the Standard Bank monthly property gauge the annualized house price growth was 7.4 percent in April 2007 as opposed to 8.4 percent in March 2007. However the declining supply in the market could stall further decline.
Elna Moolman who is the economist at Standard Bank reports  “House price growth has been slowing since mid-2006, curtailed by higher interest rates and loss of momentum in the absence of fresh stimuli”.
South Africa’s Central Bank raised the interest rate by two percentage points between June and December 2006. This was to curb inflation and strong consumer spending. This was also a reaction to the household debt that touched a new record of 73.8 percent of the disposable income between October to December 2006.
Till recently South Africa’s residential housing market had witnessed the strongest house price growth in the world. The prices had peaked to almost 40 percent year-on-year in 2004. The latter part off 2006 and early 2007 is a different story though. This stagnation was forecasted and expected in early 2007. Residential building plans by the town councils for January and February 2007 were slightly lower than that for January to February 2006. However plans for townhouses and apartments went down by almost twenty percent.
Such reactions are highly understandable as the residential property market along with other rate sensitive types of consumer spending responds to the changes.
The good news here is that with the supply of residential properties also reducing the prices are expected to be tempered. This one fact should keep the market stabilized for the time being. Moolman says, ”While very little, if any, growth in house prices is expected in the near term, the prospects further down the line remain solid”.
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