Demographic, economic and socio-economic factors are driving the strong growth that has been experienced since 2 000 in both the rural and metropolitan sectors of the South African housing market, says Jacques du Toit, ABSA senior economist, after the release of the bank's second Quarter 2007 Residential Property Perspective.

"Urban lifestyles, traffic congestion, technological progress and changing urban conditions have prompted people to change their living trends, with an increasing number moving to remote rural and coastal areas.

"These changes in lifestyle are having a profound effect on property markets in both metropolitan and rural areas. The combined effect of these factors caused the demand for housing to increase significantly over this period. As a result, the growth in property prices increased to levels not seen since the boom of the early 1980s."

Du Toit added that the process of urbanisation has contributed to faster population growth in the metropolitan than in the rural areas, impacting on the demand for housing in the major urban areas.

"Housing in the rural areas has become less affordable than in the metropolitan areas, to a large extent as a result of lower and slower-growing household income in rural areas compared with the major urban areas," he said.

On the outlook for the housing market, he pointed out that recent negative trends on the inflation front will put upward pressure on interest rates, which may influence house price growth.

As a result, "nominal house price growth is likely to average 13,1%, or 7,2% in real terms this year, compared with a nominal growth rate of 15,3%, or 10,2% in real terms recorded in the previous year."

Du Toit predicts that in 2007 the housing market will be driven by a combination of factors. These include: the availability and cost of serviced land for residential development; building costs increases and inflation trends; interest rate movements; the overall performance of the economy; growth in the real disposable income of households; trends in household debt levels; the affordability of housing.