Positive turn for home sellers in South Africa

 ·14 Mar 2024

House price inflation in South Africa remains virtually flat, but sellers should expect some relief in the coming months due to a pick-up in demand.

The FNB House Price Index growth dropped from 0.9% (revised from 0.6%) in January 2024 to 0.7% in February.

“These low levels of house price appreciation should persist in the near term, amid still elevated living and borrowing costs, as well as heightened political uncertainty, both domestically and internationally,” FNB said.

“That said, our base case view suggests that the house price cycle has bottomed.”

“The gradual decline in inflation and borrowing costs from 2H24, combined with some employment gains, should modestly stimulate demand in the interest-rate-sensitive segments over the medium term, which would support a moderate uptrend in house prices.”

According to the latest FNB Estate Agents Survey results, the market activity rating defied previous estate expectations and ticked up further from 5.3 (out of 10) in 4Q23 to 5.8 in 1Q24.

Recent trends in activity rating suggest that home buying bottomed out between 2Q23 and 3Q23 and is now on the path to recovery.

However, the current rating remains below the long-term average of 5.9 and far lower than the most recent peak of 7.1 in 4Q20.

On a per-province basis, the Eastern Cape saw the strongest recovery, from 5.0 to 5.8, while the Western Cape recorded the highest activity, from 6.0 to 6.5.

Recent gains in Gauteng and KwaZulu-Natal also continued, climbing from 5.0 and 5.7 to 5.5 and 5.9, respectively.

Moreover, the increase in buying activity also leads to a reduction in the time it takes to sell a property in South Africa.

The average time a house was on the market dropped from 81 days in 4Q23 to 76 days in 1Q24.

Results suggested that much of the improvement came from the Western Cape and Gauteng.

In KZN, however, the average time of the market increased by 11 days to 82 days.

These improvements somewhat lifted the moods of agents, with the proportion of those satisfied with current market conditions increasing from 49% in 4Q23 to 56% in 1Q24.

The improvement was relatively broad-based, expect for KZN, where sentiment declined following two quarters of recovery.

Not all good news

“That said, forward-looking indicators suggest a general lack of conviction among estate agents that this increase in activity will be sustained in the near term,” FNB said.

“Only 38% of respondents expect activity to increase in 2Q24, up from 31% previously.”

“This reflects agents’ lingering concerns around affordability, political uncertainty, and lack of job security.”

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