South African House Prices Drop Most Since 1986, Absa Bank Says
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South African house prices fell an annual 2.7 percent last month, the steepest decline since November 1986, as a possible recession in the continent’s biggest economy damped demand, said Absa Group Ltd.
The average nominal house price dropped to 941,600 rand ($111,195), the Johannesburg-based lender said in an e-mailed report today. Prices fell 0.4 percent in the month.
“The poor economic outlook has made people a lot more uncertain about making financial commitments,” said Jacques du Toit, a senior property analyst at Absa, South Africa’s biggest mortgage lender. “Banks have also tightened their lending requirements due to the financial crisis, which restricts the amount of people that are able to afford a home.”
South African Reserve Bank Governor Tito Mboweni said on April 7 that he “would not be surprised” if the economy shrank for a second consecutive quarter in the three months through March, following a 1.8 percent contraction in the fourth quarter. That would push South Africa into its first recession in 17 years.
The International Monetary Fund said April 22 that South Africa’s economy will shrink 0.3 percent this year.
Prospects for a recession have forced monetary policy makers to accelerate interest rate cuts to boost spending. The Pretoria-based central bank has cut the main interest rate 3.5 percentage points in the past five months to 8.5 percent, the lowest since Dec 2003.
