South African House Prices Slide Most in 23 Years (Update1)

By Mike Cohen

July 6 (Bloomberg) -- South African house prices fell the most in 23 years last month, dropping 4.4 percent from the year- earlier period, according to Absa Group Ltd., the country’s biggest mortgage lender.

The average nominal house price dropped to 924,600 rand ($115,130) as prices fell 0.5 percent in the month, Absa said in an e-mailed report today.

South Africa is in its first recession in 17 years, pushing up unemployment, slowing consumer spending and depressing house prices. The Reserve Bank has cut its benchmark interest rate five times since December, dropping it to 7.5 percent, to help revive the economy.

“Nominal house price deflation is set to continue for the rest of 2009, starting to slow down towards the end of the year,” Absa said in an e-mailed report today. “The lagged effect of lower interest rates and a gradual recovery in the economy from the second half of the year are factors which will contribute to an expected improvement in residential property market conditions from early 2010.”

House prices will probably decline about 3.5 percent this year, and by more than 12 percent after taking inflation into account, the Johannesburg-based lender said.
Absa’s house-price index is based on the average cost of a home from the mortgage applications it receives. Standard Bank Group Ltd., which uses the median price in its survey, said July 1 that house prices fell 4.9 percent in June compared with a year earlier.

To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

Go to www.ipsinvest.com for more information on South African Property.