This was largely the result of the base effect of slowing house price growth as well as price deflation in one segment of the market twelve months ago. However, monthly price growth is still on a declining trend, which will most likely cause year-on-year price growth to moderate later this year.

These trends are according to the Absa house price indices, which are based on applications for mortgage finance received and approved by the bank in respect of middle-segment small, medium-sized and large homes.

Price growth in the middle segment of the market was recorded at 10,2% year-on-year (y/y) in February this year, after rising by a revised 9% y/y in January. Real price growth came to 3,5% y/y in January.

The average nominal value of homes in each of the three middle-segment categories was as follows in February 2013:
 Small homes (80m²-140m²): R776 700
 Medium-sized homes (141m²-220 m²): R1 076 800
 Large homes (221m²-400m²): R1 575 400

While inflationary pressures persist, headline consumer price inflation, at 5,4% y/y in January this year, remained below the 3%-6% target range. The rand exchange rate depreciated to above R9 per US dollar in the first week of March, while fuel prices were hiked further earlier this month. These factors will be considered by the Reserve Bank's Monetary Policy Committee when meeting later this month to decide on monetary policy.

Relatively subdued real economic growth of around 1,6% was recorded in the second half of 2012 as a result of global economic trends and the effect of labour market instability in various sectors of the economy. This brought growth to a real 2,5% in 2012, down from 3,5% in 2011.

The economy is forecast to grow by a real 2,8% in 2013. Although nominal year-on-year house price growth is on an upward trend, price growth for the full year is projected to remain in single digits, which will be the result of monthly price growth still slowing down and expected to be reflected in year-on-year price growth later this year. In real terms house prices are forecast to remain under pressure in view of consumer price inflation forecast to rise to above 6% this year.