Absa House Price Index - August : Pace of house price growth slowing down further

According to the latest Absa House Price Indices, nominal year-on-year price growth in all three categories of housing (small, medium, and large houses) in the middle segment of the market slowed down further in August 2008. In real terms (i.e. after adjustment for inflation) prices dropped to levels last seen in early 2006.

The latest price trends were the result of deteriorating economic conditions (surging inflation, higher interest rates and slowing real household disposable income growth). These factors had a negative effect on the financial position of many households, which caused housing to become less affordable over a wide front.

The average nominal price of middle-segment housing (see explanatory notes) increased by a low 1,7% year-on-year (y/y) in August 2008, down from a revised growth rate of 2,6% in July. The August growth rate was the lowest since January 1993, and brought the average nominal price of a house in this segment of the market to about R962 500. Against this background the risk of nominal year-on-year house price growth moving into negative territory, is increasing. In real terms prices declined for the sixth consecutive month in July, by 9,6% y/y (-7,7% y/y in June), based on headline CPI inflation. This was the biggest real price drop since November 1992, when it was 9,8% y/y. On a month-on-month basis house prices were down in both nominal terms (-0,1% in August) and real terms (-2,1% in July).

Nominal price growth with regard to small houses (80m²-140m²) came in at 3,9% y/y in August 2008 (4,8% y/y in July). This brought the average nominal price of small houses to about R682 500 in August (0,1% up on July). In real terms the average price of small houses dropped by 7,6% y/y in July after a decline of 5,7% y/y was registered in June. In July the average real price of a house prices in the small category was down by 2,0% compared with June.

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