Pretoria – Road traffic congestion and the scarcity of residential land close to the major metropolitan areas would continue to drive house prices in future, John Loos, a property strategist at First National Bank commercial banking, said yesterday.

Loos said motor vehicles would have an effect on property values because the roads were clogging up.

He said this was as a result of the expansion of the economic infrastructure not keeping up with additional vehicles on the roads.

This would lead to the urban land inflation rate increasing as people tried to move to better located areas to avoid congestion, he said.

“We’re heading for less affordability because of land scarcity,” he said.

New vehicle sales had more than doubled since 2000 and 1 million new vehicle sales a year could be expected in the next decade, he said.

Loos said demographic changes and deteriorating affordability would also fuel demand at the lower end of the housing market.

He said these demographic changes included the fact that the average size of households was getting smaller. This means that the number of households is growing faster than the population.

The improved employment potential of previously disadvantaged individuals was one of the key drivers of this trend.

The affordable end of the market was expected to receive a boost from this trend, said Loos.

Loos said residential building would also have to compete for resources, including building materials, with other segments of the construction industry. His comments come against the background of “four evil forces” that are currently negatively influencing the housing market.

These include the implementation of the National Credit Act, rising interest rates, a slowing global and domestic economy and a lack of further transfer duty relief.

“I think the market is on its way downwards until the first half of 2008. But it will be a soft landing. This year is probably going to be the worst year of the decade for the residential property market,” he said.

Loos said the three-year deterioration in the interest rate environment after 2003 was still in progress.