Absa Predicts Significant House Price Rise

January 20 - Absa, one of South Africa's leading banks, predicts that house prices are set to grow up to 7% in nominal terms in the coming year.

Nominal terms incorporate inflation as well.

In real terms, Absa predicted that a marginal increase in house prices will be seen this year.

"Prices declined in the first half of 2009, but started to rise on a month on month basis after May," said the Senior Property Analyst at Absa, Jacques du Toit.

It is believed that better economic conditions, as well as the lagged effect of lower interest rates and looser credit conditions overall, affected the price of houses in South Africa.

However, du Toit was still cautious when speaking about the future of the South African property market.

"The household sector is still experiencing some financial strain," he said. "The ratio of household debt to disposable income remains relatively high at almost 80%, while real disposable income dropped further in the third quarter last year in the wake of major job losses during the course of the year."

As such, du Toit said that the effects of the lower interest rates would not be felt by the end of 2010.

On the flip side, South Africans should note that real disposable income growth is expected to change its downward trend towards the middle of the year.

"The economy is expected to improve further during the course of 2010 and record real GDP growth of about 2.5% this year," said du Toit.

1/20/2010 9:24:48 AM