JOHANNESBURG (Reuters) – South African median house prices fell by 11.3 percent year-on-year in June, weighed down by higher interest rates and new, tougher credit laws, a survey showed on Tuesday.
Sponsors Standard Bank said house prices peaked in June last year as uncertainty began to bite about the impending National Credit Act (NCA), which came into effect that month to clamp down on excessive lending in the market.
Its monthly property gauge showed the median house price at 550,000 rand last month compared to 620,000 rand a year ago. The five-month moving average growth rate measured -7.8 percent.
The bank said demand for mortgages had been falling since June 2007.
“This is due to a confluence of headwinds confronting the South African consumer,” it said in a statement.
“These include high interest rates and inflation as well as additional hurdles of accessing credit brought about by the NCA. In our view, declines in the demand for property of this magnitude and duration are not inconsistent with national house price deflation.”
South Africa’s central bank has raised its repo rate by 500 basis points to 12 percent since June 2006 to try tame inflation, but price pressures, driven by food and fuel costs, continue to build.
The targeted CPIX — consumer inflation minus mortgage costs — surged to 10.9 percent year-on-year in May, its highest level in 5-1/2 years. All-items inflation stood at 11.7 percent.
The higher rates have pushed monthly mortgage payments up 36 percent over the past two years.
Standard Bank said the monthly data may have been distorted by high base effects due to people rushing to finalise deals before the credit law came into effect last year, but the broad trend was in line with the tough conditions consumers faced.
