Nominal price growth of 13,6% y/y was recorded in October this year.
The average price of a house was about R963k in November. In the first eleven months of the year, nominal house price growth averaged 14,9% compared with the same period last year.
Real y/y price growth came to 5,3% y/y in October (6,8% in September). In the first ten months of 2007, real growth in house prices averaged 7,7% y/y. The real growth rate is based on the headline consumer price index (CPI).
On a month-on-month basis, nominal house price growth slowed to 0.5% in November from 0.6% in October. In real terms, house prices declined by 0.3% in October compared with September.
Inflationary pressures in the economy have mounted in recent months on the back of exchange rate fluctuations, and oil and food price movements. As a result, the CPIX inflation rate jumped to 7,3% in October this year — well above the 6% upper limit of the inflation target range.
The upward pressure on inflation is expected to continue in coming months after domestic fuel prices were increased to a record high as from Wednesday. Against this background, CPIX inflation is forecast to peak at a level of about 8% in the first quarter of next year, Absa said.
In view of the abovementioned inflation trends and expectations, the Reserve Bank's determination to bring CPIX inflation back within the 3%-6% target range, and rising oil and food prices, a further 50 basis point hike in interest rates is expected at the Monetary Policy Committee meeting tomorrow.
Nominal house price growth is expected to continue tapering off towards the end of the year, with average growth for the full-year projected at 14,6%.
If recent trends in both year-on-year and month-on-month house price growth are to continue, price growth of just above 11% may be recorded in December on an annual basis.
Nominal growth in house prices may drop to as low as 9% in 2008, largely driven by the tightening of monetary policy since mid-2006, as well as a slower pace of economic expansion, lower real household disposable income growth, and the impact of the National Credit Act (NCA). – I-Net Bridge
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