House prices slow

The year-on-year growth in the value of middle-segment homes slowed down further in November, Absa says.

"The year-on-year growth in the value of homes for which Absa approved mortgage finance slowed down further in both nominal and real terms in November 2010," said Jacques du Toit, sectoral analyst at Absa Retail Bank, in a statement.

In all three categories of housing - small, medium and large - price growth was lower in both nominal - where the effects of inflation are not taken into account, and real terms - which factors in the effects of inflation, in November compared to last year.

"On a monthly basis, home values continued to decline after reaching a peak around April this year, but the pace of monthly contractions appears to be slowing down."

The downward trend could be influenced by the slowing economic growth since the second quarter and the loss of 275,000 jobs in the first three quarters of the year, said Du Toit.

Fewer interest rates cuts this year compared to 2009, the lack of improvement in consumer confidence and the high levels of debt in relation to disposable income, also played a role.

The small house segment - from 80 to 141 square metres - saw average nominal price growth of 0.8 percent year-on-year in November 2010. In October it was 5.9 percent.

"This brought the average value of a small house to around R688,100 in November," said Du Toit.

The average nominal value of medium-sized houses (141 to 220 square metres) increased by 1.8 percent year-on-year in November, compared to three percent in October.

The average house price in this category was around R951,100 in November.

In the large house category - between 221 to 400 square metres - the average nominal price level was marginally down by 0.1 percent year-on-year in November after increasing by 0.3 percent year-on-year in October.

The average price of a large house was around R1,407,300 in nominal terms in November.

Du Toit expected nominal price growth to average about seven percent for the year.

Real price growth, based on consumer price inflation, was forecast at around 2.5 percent.

Du Toit said given expected economic developments, nominal house price growth would be just below five percent for 2011.

"Based on forecasts for nominal price trends and consumer price inflation, prices are set to remain almost stable in real terms in 2011 compared with this year."

Absa's observations tally with those of the November FNB House Price Index released last week, which found that average house price growth slowed in November to a year-on-year rate of increase of 3.8 percent.