Turn coming for property in South Africa

 ·25 May 2024

Home loan values and volume improvements suggest that the property market could soon turn a corner.

Data from BetterBond’s latest Property Brief calls for cautious optimism. The improvements in loan values and volumes suggest that the property market slowdown of the last two years may have bottomed out.

While the national home loan value is 1.2% higher than the year to April 2023, the home loan volumes this year have jumped by 20%.

However, amid restrictive monetary policy, the number of new applications for the 12 months to April 2024 remained 15% lower than the prior 12-month period, even if the April index for new home loan applications was 2.3% higher than the first quarter of 2024.

Bradd Bendall, interim CEO of BetterBond, said that the drop in consumer price inflation (down from 5.3% in March to 5.2% in April) could lead to lower interest rates, providing relief to debt-burdened households while also boosting home loan activity.

“At a time of great uncertainty, as South Africans prepare to head to the polls, there is some comfort in evidence of the property market’s resilience, as house prices continue to strengthen, albeit modestly,” said Bendall.

“Hopefully, with the rand consistently performing well against other currencies and CPI resuming its downward course, the Monetary Policy Committee (MPC) will announce a long-awaited drop in the interest rate when it meets on 30 May, the day after the elections.”

Slightly too optimistic

Despite Bendall’s optimism, the MPC is unlikely to cut interest rates soon.

Despite the drop in inflation, it remains above the midpoint of the 3% to 6% target range, making it unlikely that the repo rate will be lowered from the 15-year high of 8.25% at the upcoming meeting.

“Despite this better-than-expected outcome, with the South African Reserve Bank increasingly signalling its preference for a 3% point inflation target, we expect no policy rate easing until November,” Razia Khan, chief economist for Standard Chartered Bank, said.

Read: How much you need to earn to send your kids to private school in South Africa

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