Leisure property is still experiencing difficult conditions, Absa said on Monday.

In a statement, Absa analyst Jacques du Toit said that in the country's coastal regions, house prices dropped at an average nominal rate of 8.5 percent year-on-year in the third quarter.

Only the Western Cape's South Coast is posting marginal positive price growth of 0.2 percent year-on-year.

In real terms, house prices in coastal regions dropped 14.1 percent year-on-year in the third quarter, after a similar real price drop occurred in the preceding quarter.

"This is regarded as an indication that the market for investment and leisure property is to a large extent still experiencing difficult conditions in the wake of the economic cycle and that it may take some time before this segment of the market will recover," Du Toit said.

He said nominal year-on-year house price deflation was set to be "a thing of the past in the near future", with prices forecast to decline by less than two percent for the full year if the latest trends continued.

However, in real terms house prices were projected to drop by around 8.5 percent in 2009, "which will be the second consecutive year of a real decline in house prices," Du Toit said.

In 2010, higher levels of activity in the residential property market were expected, with nominal house price growth projected at between two and three percent.

However, house prices were forecast to decline somewhat further in real terms next year, based on current projections for nominal price growth and the outlook for consumer price inflation.

Sapa

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