South African House Prices to Decline in 2016, According to Retail Bank
Absa, South African retail bank announced today, that house price in the country is to decline in 2016 as inflation continues. Fitch Ratings also mentioned the property market in South Africa will weaken as the country's economy faces challenges.
Jacques du Toit, a property analyst at Absa Home Loans in his report estimated that nominal house price growth will be about 5 percent this year, compared with an estimated 6 percent in 2015. In his report, as Bloomberg reported, he also wrote, "The residential property market is set to reflect the broader macroeconomic trends, with subdued demand for and supply of housing expected during the course of the year."
"This will in turn dampen the demand for and growth in mortgage finance for housing," du Toit added.
South Africa is the second-largest economy in Africa, and it is predicted in 2016 the country is facing a slowdown in economic growth. Barclays Africa Group forecasted that the 2016 economic growth only will be at 0.9% at this year, a decline from last year 1.3%. While the inflation will remain at the 3% to 6% target range.
Amalgamated Banks of South Africa abbreviated Absa Bank Limited is a subsidiary of Barclay Africa Group. Absa was acquired in 2013, and Barclays Africa also expands its banking service and operated in twelve African countries.
Fitch Ratings also took note of South African housing market to decline in 2016. EconoTimes reported that weak microeconomic outlook and rising interest rate hit residential and mortgage in South Africa. Fitch Ratings is one of the big-three in credit rating agencies, along with Standard & Poor and Moody.
A property sector strategist at NB Home Loans, John Loos told All Africa that housing market in South Africa which face the risk of recession. Although Estate Agent Survey for the fourth quarter shows the residential activity indicator level remains at the upper end, but he is cautious of the growth rate indicator. He said in an interview in Johannesburg, "However, while activity levels are still fairly solid, it is the indicator's direction that is of concern,"
The activity rating's year-on-year growth rate of South Africa's residential market has slid from a +12.18% positive growth "high" in the third quarter of 2014 to a -8.93% year-on-year decline by the fourth quarter of 2015.
Housing provision has been one of the greatest challenges for South Africa for years. There have been urban housing backlog which government should provide and illegal housing. Eviction of illegal housing is common in South Africa, and sometimes the eviction also happened to an occupied buildings.
In 2016, South Africa faces a huge challenge in its economy as the economic growth is forecasted to be lower and facing recession. This will also affect the property market as the price will decline.