Rise in house prices slow down as result of rate hikes
The uncertain interest rate environment is contributing to the slowdown in South African house price growth. Nominal house price growth of 14.5% y/y was recorded in the middle segment of the market in July. This is down from the 15% y/y growth recorded in June.
South Africa’s biggest home loan lender, Absa, says that the average price of a house increased to about R932 000. According to Absa Senior Economist, Jacques du Toit, this downward movement in house price growth is due to the uncertain interest rate environment.
Apart from another interest rate hike this month, Absa expects the rate to remain flat for the rest of the year and into next year. On a month-on-month basis, nominal house price growth slowed further to 0.5% last month, compared with the 0.7% recorded in June.
This is the slowest nominal month-on-month growth recorded in more than seven years. The last time nominal growth was as slow, was in September 1999, with a month-on-month growth of 0.4%. Du Toit said month-on-month house price growth was moving down all the time and would affect year-on-year growth.
With the average house price being more than R900 000, the monthly earnings for a household would have to be about R25 000 to enable it to be able to afford to buy such a property. This is contributing to the slowdown in property movement as many households are not earning this amount of income a month.
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