Bleak house

Standard Bank's median house price has fallen from R599 000 in May last year to R520 000 this year - a contraction of 13.2 percent. As a caveat however, the bank notes that the decline has been distorted by a high base following efforts by market participants to pre-empt the implementation of the National Credit Act last year.

Nevertheless the downward trend "… in house price growth still reflects the decline in demand for housing due to the decimation of housing affordability". Price deflation and what is seen as a correction in house prices to more plausible levels has been exacerbated by rising inflation (expected to be well above the target band for the next three years), higher interest rates and record household indebtedness.

A further expected increase in the prime rate to 15.5% per annum later this month by the South African Reserve Bank will mean that monthly instalments will be approximately 36% more than they were in June 2006 when the current bout of interest rate increases began.

Standard Bank Residential property gauge