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14 Feb 2011

Property prices declined in real terms : ABSA

Annual growth in house prices started the year sluggishly, Absa's house price index showed yesterday.

"The year-on-year growth in the average nominal value of homes in the three categories of the middle segment of the housing market for which Absa approved mortgage finance, started the year at a low," said Jacques du Toit, the sectoral analyst at Absa Retail Bank.

In real terms, taking the effects of inflation into account, year-on-year price growth in the medium and large house segments turned negative towards the end of 2010.

No real price growth was recorded in the small house (80m² to 141m²) segment in December last year.

In January 2011 the nominal values - excluding the effects of inflation - of small houses dropped 0.5 percent year on year. This brought the average price of a small house to about R722 900.

Du Toit said the average value of medium-sized houses (141m² to 220m²) increased by 1 percent year on year in nominal terms in January, when the average price in this category was about R966 500.

A real price decline of 1.3 percent year on year was recorded in December.

Nominal year-on-year price growth in the large houses (221m² to 400m²) segment stayed constant at 1.6 percent year on year towards the end of 2010 and into January.

The average price of a large house was R1 456 700 in January. In real terms, the average price in this segment was down by 1.8 percent year on year in December.

Du Toit said a growing economy and low interest rates, accompanied by an increase in employment and household disposable income growth, could support the residential property market in 2011.

However, in real terms, house prices could decline this year.

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