SOUTH African house-price growth has slowed to an annual 3.8 percent in June, the slowest pace since September 1999, as rising interest rates curb demand, according to Absa Group Ltd, the country's biggest mortgage lender.

Growth in house prices eased from a revised 4.7 percent in May, Johannesburg firm Absa said in an e-mailed statement obtained by Bloomberg News yesterday. The average price of a house was 965,500 rand (US$124,881) last month.

"House-price growth of around 5 percent is forecast for the full year, declining to about 4 percent next year," Jacques du Toit, senior property analyst at Absa, said.

The South African Reserve Bank has raised interest rates 10 times since June 2006 to quell inflation, most recently lifting the benchmark rate by a half point to 12 percent in June, the highest in five years.

A surge in the SARB targeted inflation rate to 10.9 percent in May would increase pressure to raise lending rates next month, Du Toit said.

Adjusted for inflation, prices in the middle segment of the market dropped by an annual 6.3 percent in May, the biggest decline since April 1993. Prices will probably fall 6 percent this year after adjusting for inflation and about 3.3 percent in 2009, Du Toit said.

Standard Bank, the second-biggest South African mortgage lender, said on July 1 that house prices fell an annual 11.3 percent in June, based on mortgage applications.

The median price slipped to 550,000 rand, Johannesburg-based Standard Bank said.

Absa calculates house-price inflation using the average value of home-loan applications it grants to customers.