With the repo rate dropping a full percentage point, from 8.5% to 7.5% between July 2024 and February this year, and hopes of more rate drops to come, residential property appears to have turned a corner.
Image: File
Although geopolitical events beyond our borders could derail our economy in ways we cannot fathom, there is room to be optimistic about South Africa’s residential property market.
The national market has been in the doldrums (there have been regional exceptions, such as the Western Cape) ever since the post-Covid inflation surge forced the SA Reserve Bank to start raising interest rates at the end of 2021. These continued to climb in 2022 and ‘23 until they were the highest they had been since mid-2009.
There were other factors, of course: this time last year many South Africans, including me, were very gloomy, having endured many months of unprecedented load-shedding and witnessing the rapid disintegration of our road, rail and harbour infrastructure. There was also the remarkable rise of the MK Party, which eroded the ANC’s support base and which many saw as a threat to economic stability.
However, we then had our elections and the formation of the Government of National Unity (GNU), the cessation of load-shedding and a decline in inflation, with the consequent easing of interest rates, and suddenly the future looked brighter.
There is always a lag effect on business activity, but by the end of last year the effects of these positive developments were beginning to materialise. With the repo rate dropping a full percentage point, from 8.5% to 7.5% between July 2024 and February this year, and hopes of more rate drops to come, residential property appears to have turned a corner.
I spoke earlier this week to a Sandton estate agent, who said 2024 had been the worst year she had ever experienced in the property game, but this year had got off to a good start. She also noted something of a reversal of the “semigration” trend of people moving out of Johannesburg and settling in coastal cities such as Cape Town.
John Loos, senior property economist at FNB, writing in his personal capacity for the BizCommunity website in January, said the interest rate cuts “could be expected to provide a mild boost to the highly credit dependent property market, the residential side of the market arguably being more interest rate sensitive than the commercial property side”.
The Absa Homeowner Sentiment Index for the fourth quarter 2024, released in early March, showed that South Africans’ confidence in the future of residential property had climbed to 87% – the highest level recorded in a decade, with the dominance of first-time buyers an ongoing trend. The survey, which sampled over 1 200 income earners from urban areas, showed growth across all its measurement categories.
“This result bodes well for the outlook of the property market into 2025 and is indicative of the resilience of South African consumers who are optimistic even as they emerge from the burden of a protracted cost-of-living crisis,” said Nondumiso Ncapai, managing executive of Absa Home Loans.
Key metrics in the report are as follows:
“While we continue to monitor key developments in the geopolitical arena as well as within our own country’s Government of National Unity, we remain optimistic about the prospects for South African consumers and businesses in the real estate environment,” Ncapai said.
First-time buyers are expected to remain drivers of market activity, the Absa report found, displaying high levels of positive sentiment. In 2024 they accounted for 53% of property registrations. Ncapai said that the aspiration of home ownership remained strong, and a large base of potential buyers was looking for opportunities to participate in the market.
ooba Home Loans says it recorded a marked increase in the average purchase price paid by first-time buyers in December, followed by a further marginal increase in January, bringing the average to a record high of R1.264 million (up by 5.9% year-on-year). However, it also notes that, compared with a decade ago, the average first-time homebuyer is now older (36 years), with most homebuying activity taking place in the 33-43 age bracket.
The Lightstone Property Index for January shows that, nationally, house prices rose by 2.2% year-on-year, on average. Growth is below the January year-on-year CPI inflation rate of 3.2%, but closer to real growth than at the beginning of 2024, when the figures were about 1.7% (property growth) and 5.1% (CPI).
“Of the three primary provinces – Western Cape, Gauteng and KwaZulu-Natal – Western Cape continues to outperform Gauteng and KZN. However, its trajectory has flattened and marginally decreased, while Gauteng and KZN show continued growth, albeit from lower bases,” the report says.
Looking at property segments, Lightstone reports that growth for high-value properties (R1 million - R2m) rose to 2.3% year-on-year. The low-value (below R0.5m), mid-value (R0.5m - R1m) and luxury segments (above R2m) were 8.7%, 2.1% and 2.2% respectively.
Martin Hesse. Martin Hesse. File Image: IOL
Image: File Image: IOL
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