Signs of life for South Africa’s property market  – but there’s a catch

 ·15 Apr 2024

South Africa’s property market is starting to see an uptick in sales, but the recovery may take longer than other markets across the world.

According to Century 21 South Africa CEO Harry Nicolaides, there are signs that the South African property market is starting to recover, with signs of growth in the sector.

“There has been an improvement in the rate of sales in the local property market in the first quarter of 2024 compared with the last quarter of 2023,” said Nicolaides.

“Interestingly, this positive phenomenon has been driven on optimistic market sentiment alone, as the country has not had any interest rates cuts so far this year.”

Therefore, we expect even higher sales activity the moment the interest rate cutting cycle begins which has been predicted to occur in the second half of 2024.”

Despite acknowledging that some potential buyers and investors are waiting to commit until after the South African general elections in May, he believes that the market is more concerned with interest rate movements.

“Globally, the main factor affecting property prices and the demand for property is bank lending rates (mortgage interest rates or borrowing costs),” he said.

“A higher interest rate reduces affordability levels amongst buyers, so a higher interest rate environment lowers demand for property which in turn reduces property prices.”

Although it is understandable for buyers to hold-off their decision until after the elections, studies in the UK and US show the impact these delays in decision making only affect a 2% to 3% of buyers for a few months.

Nicolaides said that the high interest rate environment globally has had a negative impact on property sales and house price growth over the last two years,

“Higher interest rates are directly linked to higher inflation rates and recently inflation rates globally have risen as a result of energy procurement constraints caused by the Russia/Ukraine war,” he said.

“South Africa is not immune to this although our situation is somewhat exacerbated by our own ‘self- inflicted’ energy provision shortfalls and the lack of delivery of basic utilities to our population.”

“So, although we follow the same financial thus property trends as the rest of the world, our recovery may take longer to realise.”

Interest rate questions  

He added that there could be good news ahead as global indicators suggest that interest rates have peaked, with cuts expected in the second half of the year.

“This positive sentiment has already filtered through to the property sales market and an uptick in sales and house price growth is already being experienced in the US, globally and in South Africa.”

Despite Nicolaides’ optimism, bets in the financial futures market show that the South African Reserve Bank (SARB) won’t cut interest rates in 2024 amid persistent inflation.

The shift followed a higher-than-expected US inflation reading for March, with investors pricing the possibly of a hike from the SARB next month in response to sharp change in sentiment over the US Fed.


Read: R200 million bailout for the biggest shopping mall in South Africa

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