Absa’s House Price Index confirms that house prices are still very weak in 2009 , however their analysts believe that the property market should start inproving during early 2010. According to the study for the period to June 2009 , house prices declined by 4.4% year on year and adjusted for inflation the real decline is 11.1%.

Expectations are that this trend should continue through 09 and start slowing down towards the end of the year. The effects of rate cuts should start taking effect , rate moves typically have a lag effect and could take up to 18 months before they impact on the consumer confidence and the economy. Another factor to consider is that debt laden consumers are using rate decreases to pay down debt which has positive long term benefits for the South African economy.

According to the Absa House Index

Small Houses (80m²-140m²) declined by 4.7% with the average house valued at R 653 000 ,

Medium Houses (141m²-220m²) declined by 3.1% with the average house valued at R 917 600 ,

Large Houses (221m²-400m²) declined by 0.5% with the average house valued at R 1 381 700.

It is interesting to note that larger house showed the lowest decline indicating that larger houses might well be a better investment . Weaker house prices are good news for property investors shopping for bargains and buyers who don’t have to sell an existing property.

Homeowners should focus on reducing their debt levels and paying down their mortgage.If you don’t have to sell then it would be prudent to hold on until next year when the economy starts to improve and the country is in the midst of World Cup euphoria.