South African house prices rose 3.8 percent in 2008, the slowest pace in 12 years, as interest rates at a five-year high hurt consumers, said Absa Group Ltd., the country’s biggest mortgage lender.
Growth in nominal house prices slowed from 14.5 percent in 2007, Johannesburg-based Absa said in an e-mailed statement today. Home prices rose an annual 1 percent in December, little changed from a revised 0.9 percent in November, it added.
The property market will be slow to recover this year even as the central bank probably lowers its benchmark interest rate by a total of 3 percentage points and inflation slows, Absa said. Job losses and a slump in economic growth to below 1 percent in 2009 from about 3 percent last year may depress growth in house prices until the second half of the year, the lender said.
“The outlook for the residential property market in 2009 remains bleak,” Jacques du Toit, a property economist at Absa, said in the statement. “Despite expectations of lower inflation and interest rates, economic conditions are expected to remain depressed for most of the year.”
Nominal house prices may decline as much as 2.5 percent in 2009, Absa said. Adjusted for inflation, prices will probably plunge by as much 8 percent this year, compared with a 6.7 percent drop in the first 11 months of 2008, the lender said.
South Africa’s central bank cut its benchmark interest rate by half a percentage point to 11.5 percent on Dec. 11, the first reduction in more than three years. The rate was raised by 5 percentage points in the two years through June 2008.
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