SA Property Heading into a Brighter Q4
Paul Stevens, CEO of Just Property, offers insights into the market's current state and explores the reasons for cautious optimism.
After a challenging 2023, defined by rising interest rates and subdued demand, I was cautiously hopeful for 2024. This prescience seems to have been borne out as the year has unfolded.
Unfortunately, unemployment increased by 0.6 of a percentage point in Q2 of 2024, but by August, inflation had eased to a three-year low of 4.4%, which provided the impetus for the Reserve Bank’s Monetary Policy Committee to slash the repo rate by 25 basis points to 8% on 19 September.
This, along with the possibility of further cuts in November this year and in 2025, a stronger showing by our volatile currency, a projected economic growth increase, and the vast improvement in the stability of energy provision, has raised confidence. BetterBond noted in its September 2024 Property Brief that, quarter on quarter, home loan applications had increased by 6.5%. A growing economy means more jobs, so hopefully, employment figures will soon follow suit.
Let’s take a close look at the residential property market and where we are now.
House Prices and Market Activity
The FNB House Price Index has shown slow recovery in 2024, with annual growth sitting at 0.6% in August. However, FNB forecasts a further 25bps repo rate cut this year and another cut in early 2025. Consequently, the bank has a “slightly more optimistic outlook for buying activity and house price growth in the coming years” and has revised its forecasts upward for 2026 up to 3.6%.
I feel that as interest rates continue to decline in the coming year we will start to see more buyers returning to the market as their affordability improves, this is a good time for buyers to get into the market as there are still sellers that have not been able to sell during this tough past year.
Rental Market: Strong Growth in Key Provinces
On the rental front, the market has shown significant resilience. According to the PayProp Rental Index, an impressive 4.9% year-on-year rental growth was recorded nationally in April, and 5.2% in June (4.9% for Q2), marking the highest increase since 2017. Average national rent at the end of the quarter stood at R8,785, with the Western Cape leading the charge at nearly double-digit growth (9.7%). Interestingly, this growth has outpaced inflation, proving once again that property is a worthwhile investment.
Gauteng, one of the most significant property markets in the country, saw a 3.8% year-on-year rental growth, with the average rent surpassing R9,000. The Northern Cape, despite having the lowest growth at 2.1%, and KwaZulu-Natal at 1.5%, showed signs of recovery from previous quarters.
The Free State, after a period of rapid rental growth, saw a sudden drop to 5.8% from the previous quarter’s 9.1%. This decline is expected to continue throughout the year, reflecting the volatility in certain provinces.
Property Sentiment: Cautious but Optimistic
Sentiment around property ownership and investment was mixed at the end of Q2. According to the Absa Homeowner Sentiment Index Q2 2024, 80% of respondents still viewed property investment as a valuable asset despite concerns about high prices and economic instability. However, selling sentiment remained low, with only 47% of respondents believing it was an ideal time to sell. This is primarily driven by concerns about job security and an unstable economy.
Rental properties, in particular, continued to be viewed as a good source of passive income.
Outlook
As we move towards the end of 2024, I feel that the property market is stabilising and showing potential for recovery. While house prices remain sluggish, improving economic conditions and interest rate cuts could foster a more positive environment for both buyers and sellers.
The rental market continues to provide opportunities, especially in high-demand areas like Gauteng and the Western Cape. My advice to investors is that they should remain cautious but optimistic, focusing on long-term gains and closely monitoring economic indicators that could shape the future trajectory of the market.
The property market, like the broader economy, faces numerous uncertainties, but the prevailing sentiment points to potential growth, particularly in rental and investment sectors. The economy grew by 0,4% in Q2, and the Reserve Bank is predicting, as always, navigating these trends will require careful financial planning, agility, and the right professional support.