House prices are virtually flat for the second month in a row, according Absa. The average nominal price of middle-segment housing was down slightly by 0.03 percent year-on-year (y/y) in January 2009 after negligible growth of just 0.1 percent y/y was recorded in December last year, the country's biggest mortgage lender said on Wednesday.

The bank said that this brought the average price in this segment of the market to about R962 800 in January.

In real terms middle-segment house prices were down by 8.6 percent in December while declining by an average of 6.9 percent in 2008 after rising by 7.0 percent in 2007. Last year was the first time since 1999 that house prices dropped in real terms on an annual basis.

All real house price calculations are based on headline consumer price inflation.

On a month-on-month basis nominal house prices in the middle segment of the market have been on a declining trend since mid-2008 while in real terms prices have already been declining month-on-month since September 2007.

Nominal price growth in respect of small houses came to 0.9 percent y/y in January 2008 from 0.8 percent y/y in December.

The average nominal price of a small house came to about R685 700 in January. In real terms prices in this category of housing dropped by eight percent y/y in December and were down by an annual average of 5.4 percent last year (up by a real 4.2 percent y/y in 2007).

The average nominal price of medium-sized houses increased by a meagre 0.2 percent y/y in January (0.5 percent y/y in December), which brought the average price to R949 700.

"On a month-on-month basis the average price of medium-sized houses dropped for the third consecutive month in January," the bank said.

Prices in this category of the middle segment dropped by a real 8.3 percent y/y in December last year and were down by a real 6.2 percent in 2008 compared with real growth of 9.8 percent with 2007.

In respect of large houses, prices dropped by 1.6 percent y/y in nominal terms to around R1.368-million in January 2009 after declining by 0.9 percent y/y in December.

Prices were down by a real 9.5 percent y/y in the large category in December while declining by 5.6 percent in real terms in 2008 compared with a real increase of 9.7 percent in 2007.

"On the back of global recessionary conditions, the South African economy is slowing down rapidly. In some major sectors of the economy such as mining, manufacturing and wholesale and retail trade the real value added was sharply down by between seven and eight percent quarter-on-quarter at a seasonally adjusted annualised rate in the third quarter of 2008," Absa said.

It noted that these conditions were forecast to continue well into 2009 with real GDP growth projected at less than one percent this year.

"With the abovementioned sectors having a substantial share in total employment, job losses have occurred in these and other sectors in 2008 with employment expected to remain under pressure in 2009," concluded Absa.