The Absa House Price Index report has revealed a further improvement in home values in the middle segment of the South African housing market in July 2011.

Year-on-year growth in this segment improved further while in real terms, price deflation continued up to June this year.

The report tracks the latest trends for small, medium-sized and large homes for which the bank approved mortgage finance.

“Nominal house price growth is expected to remain in single digits up to the end of 2011,” said Jacques du Toit, Absa Home Loans property analyst.

Du Toit explained that nominal house price growth accelerated in both the medium-sized and large categories in July 2011.

However, price deflation was still evident in the small segment impacted by the strong price growth a year ago. In real terms, prices in all three categories of housing declined further in June 2011 compared with a year ago.

“Real house price calculations are based on consumer price inflation, which increased to 5 percent y/y in June, from 4.6 percent y/y in May this year.”

The average value of small homes(80-141 per square metre) dropped by a nominal 4.1 percent y/y in July with an average price of R757 100.  In real terms the value dropped by 10.2 percent y/y in June and -10.3 percent y/y in May.

Medium-sized homes(141-220 per square metre) recorded a nominal price growth of 2.9 percent y/y bringing the average price to around R995 800. This segment saw a real price decline of 3.3 percent y/y in June this year and 4 percent y/y in May.

Large homes (221-400 per square metre) saw a nominal price growth of 1.3perecent y/y achieving an average price of R1 467 800. In real terms prices fell by 3.8 percent y/y in June and -3.4 percent y/y in May.

“With consumer price inflation forecast to rise to around 6 percent y/y by year-end, house prices are set to decline in real terms this year, after rising by a real 3 percent in 2010.”- Denise Mhlanga