Loyiso Sibali
3 October 2008
Johannesburg — STANDARD Bank's median house price jumped by a surprising 3,6% year on year in September, following a decline of 1,8% the previous month.
This was the first increase in the price in 10 months and, according to Standard Bank economists, the unexpected 3,6% increase in September was not seen as a new trend, but rather the result of volatile monthly data. The median house price stood at R580000 for September.
Johan Botha, economist at Standard Bank, said that although this looked like a sign of confidence returning to the market, he still believed the market was weak and one could expect next month's numbers to again dip below zero.
"The market will remain weak until halfway through next year," said Botha. He emphasised that the increase had taken him by surprise and it by no means signalled a reversal in the housing market trend.
"The reduced affordability of housing, exacerbated by higher mortgage rates, high food and fuel prices and a slowing economy, led to a decline in the demand for residential property and a substantial softening in house price growth," said Standard Bank economists in the residential property gauge yesterday.
A five-month moving average indicated a negative growth rate of -5,2% last month , but this number included the deep declines in May (-13,2%) and June (-11,3%).
"Nonetheless, the latest data show that there is still some life in the property market," said the bank.
The report said residential property would remain in the doldrums until such time that fundamental drivers of the market took a turn for the better, and that may be some time off.
Other economic data that affected house price data included the household debt ratio, which eased somewhat after the Reserve Bank's second-quarter bulletin reported positive news regarding the household debt to disposable income ratio.
The second quarter marked the first sign of a long-awaited decline, with the ratio falling by 1 ,5 percentage points to 76, 7%. But a decline in the debt appetite of households could have harmful consequences for the property market in the short term, said the report.
Another key driver of the property market, the income of households, slumped to a growth rate of only 2 % quarter-on-quarter in the second quarter of the year, the lowest growth rate since the third quarter of 2000.
And the benchmark interest rate, which had been increased by five percentage points to 12% between June 2006 and June this year, also contributed.
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