We’re just about through the first half of 2024, and it seems like things might start to look up in the second half of the year. Let’s take a look at some of the factors shaping the market, from house price trends to the impacts of a stronger Rand and the national elections.
House prices have been maintaining a steady, albeit slow, growth trajectory. According to the FNB House Price Index (HPI), January 2024 started off with a growth rate of 0.6% year-on-year (y/y), reflecting the broader economic uncertainties and high borrowing costs that have, unfortunately, lingered. February showed a slight uptick to 0.7% y/y, and this rate held steady in March. However, by April, growth dipped back to 0.6% y/y, and May saw a modest increase to 1.9% y/y, indicating a market under continued pressure from economic factors.
Market strength indicators from FNB have confirmed the state of the market as balanced yet sluggish. In January, the Market Strength Index stood at 50.80, dipping slightly to 49.71 in February, and rising again to 50.50 in April. These figures suggest that neither buyers nor sellers hold any distinct advantage at the moment. The average time on the market decreased from 11 weeks and 4 days in January to 10 weeks and 6 days in February and April, indicating slightly increased buyer activity.
Turning to the rental market, it has faced its own set of challenges. The first quarter of the year saw rental inflation at 3.3%, a slight increase from 3.1% in the final quarter of 2023. Vacancy rates, while slightly improved, remain above pre-pandemic levels, reflecting ongoing competition among landlords.
The South African Reserve Bank (SARB) has maintained high interest rates to control inflation, impacting property affordability. Economists predict that interest rates might start declining in the second half of 2024, which could inject some dynamism into the property market. Employment gains, though modest, provide some support for property demand, as job security remains closely tied to purchasing power.
Coastal regions, particularly in the Western Cape, have seen stronger house price growth driven by semi-gration trends. These areas, popular among affluent buyers, have maintained higher demand. In contrast, Gauteng and KwaZulu-Natal have experienced lower market activity, reflecting regional economic disparities.
Additionally, the Rand has shown strength in the first half of 2024, reaching a 10-month high against the dollar. This strength is partly attributed to positive market sentiment following the national elections and a general improvement in global economic conditions. A stronger Rand can improve purchasing power for domestic buyers and reduce the cost of imported building materials, potentially benefiting the property sector.
The outcome of the national elections has brought a wave of optimism. With the elections concluded, the market anticipates a period of stability and potential economic reforms that could positively impact the property market. The new government’s policies are expected to address key economic challenges, fostering a more conducive environment for investment.
Looking ahead, house price growth is expected to remain modest but with a gradual upward trend starting in the second half of the year. The FNB HPI is projected to average around 1.4% for 2024, potentially increasing to 3.0% in 2025. The rental market is likely to see continued improvement in vacancy rates, though they may remain above pre-pandemic levels.
Overall, the South African property market in H1 2024 has demonstrated resilience amidst economic challenges, both new in 2024, and those brought over from 2023. With a stronger Rand, positive election outcomes, and anticipated interest rate cuts, the second half of the year holds promise for a slow but steady recovery.