YEAR-on-year house price inflation in the middle segment of the market accelerated in November from October, although real price deflation — adjusted for consumer inflation — was seen in the segment, Absa’s house price index shows.
The bank warned that real house price deflation could be expected to still be seen in 2013.
The Absa house price index increased by 5% year on year in November from a revised 3.3% (2.6%) year on year in October, Absa property analyst Jacques du Toit said on Monday.
The Absa house price index, which is available back to 1966, is based on the total purchase price of houses ranging in size from 80m² to 400m², priced at R3.6m or less in 2012 (including improvements), for which Absa approved applications for home loans. Prices are smoothed in an attempt to exclude the distorting effect of seasonal factors and outliers in the data. As a result, the most recent index and price growth data may differ materially from previously published figures.
"Against the background of current trends in and prospects for the economy, inflation and household finances, domestic interest rates are forecast to remain low over the next two years," Mr du Toit said.
"With house price growth slowing down on a month-on-month basis since mid-2012, year-on-year price growth is expected to be reflective of this development in the first half of 2013," he said.
"Relatively low nominal house price growth is forecast for the next 12 months, and with headline consumer price inflation projected to average around 5.5% in 2013, some real house price deflation may still occur for most of next year."
In the first 11 months of the year house prices, according to the Absa house price index, were unchanged compared with the corresponding period last year, largely affected by price deflation for small houses up to August this year.
Real price deflation was still evident in middle-segment housing up to October, but the momentum is slowing, with the small and medium-sized categories showing some real year-on-year growth in October.
Real price calculations are based on nominal prices reduced by the headline consumer price index. Consumer price inflation was 5.6% year on year in October, averaging 5.7% year on year in the first 10 months of the year.
According to Statistics SA, the real value of recorded building plans passed increased by only 1.0% year on year in September from a revised 13.2% (11.3%) year-on-year increase in August‚ while the real value of buildings reported as completed increased by 14.9% year on year in September from a revised 24.9% (25.8%) year on year in August.
The real value of recorded building plans passed increased by 1.3% year on year during January to September 2012. The biggest percentage increase was reported for nonresidential buildings (1.6%)‚ followed by residential buildings (1.3%) and additions and alterations (1%).
The real value of buildings reported as completed increased by 1.8% year on year during January to September 2012. Increases were reported for nonresidential buildings (16.5%) and residential buildings (3.2%)‚ while a decrease was reported for additions and alterations (-13.2%) during the above-mentioned period.