Things are looking up for South Africa’s property market
The South African property market has experienced significant fluctuations in recent years – but the future—not without its challenges—is looking bright.
In an interview with BusinessTech, Property24 CEO Nalen Naidoo explained that the market took a significant hit following a strong period pre-Covid in 2019.
It rebounded in 2021 and 2022 after the initial lockdown period; however, rising interest rates in 2023 led to another decline in sales volume and values.
While Naidoo acknowledged the uncertainties and challenges that have faced and are facing the market, he provided an optimistic perspective on the state and future future of the South African property market.
The CEO—who heads the company with the largest online databases of property for sale or rent in South Africa—said the market has shown signs of recovery, with sales values up 6% year-on-year.
What is contributing to the uptick?
Naidoo noted that the market is complex, and there is interplay between various factors, making it difficult to isolate any single cause of the observed growth.
However, he attributed these positive trends to a combination of factors, which include:
- Interest rate cuts:
In September and November, the South African Reserve Bank (SARB) cut interest rates by 25 basis points, to 7.75%.
Lower interest rates generally make mortgages more affordable, stimulating demand and leading to increased sales activity and higher property values.
“The (sales) values are 6% up where we were last year, and that is a really good sign because we know that the interest rate cutting cycle (will boost this),” said Naidoo.
“From all the information we are getting from economists, there’s still some room to go” with cuts, which is contributing to optimism about the market’s future, he added.
- Government of National Unity (GNU):
Naidoo described the establishment of the GNU as a positive influence on the market.
He said that since the new 10-party government took office, a more favourable economic and political environment has been created, boosting confidence and investment.
“A lot of it had to do with the formation of the GNU, which has been extremely positive for the country,” said Naidoo.
- Pent-up demand release
Naidoo said that the increase in sales values may be partly fueled by the release of pent-up demand that accumulated during the pandemic years.
“But what it did was build up a lot of demand. So, once the lockdown is released, we found quite a market rebound,” he said.
Potential challenges and uncertainties
While Naidoo expressed a positive outlook overall, he also acknowledged potential challenges and uncertainties that could impact the future of the property market. These include:
- Housing shortage:
The Propert24 CEO said that the lack of sufficient new development to meet the growing demand for housing is a major concern.
“[T]he big question around housing shortage has to be addressed,” said Naidoo.
“And so, innovative players will have to enter the market to find a way to deliver houses to this rising group of people that can afford houses. We have to find a way of building them faster,” he added.
- Economic volatility:
South Africa, like every country, faces economic uncertainties, including inflation and potential global economic downturns.
These factors could impact affordability and investment in the property market.
Going forward
Overall, Naidoo presents an optimistic view of the South African property market.
Positive trends, such as rising sales values, expected interest rate cuts, and a focus on solving rental market challenges, suggest growth potential.
However, it is crucial not to negate potential challenges, including the housing shortage and broader economic uncertainties.
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