Early signs of sustainable growth in South Africa’s housing market

Dr. Andrew Golding, chief executive of the Pam Golding Property group, notes that the outlook for South Africa’s housing market is becoming more optimistic.

He highlighted several positive indicators and early signs of sustainable growth in both house prices and market activity.

"Repeated petrol price cuts, a seemingly imminent interest rate cut, improved confidence and the continued absence of loadshedding augur well for a continued, steady recovery in the housing market.

"We have seen both sellers and buyers, including investors, who had previously been sitting on the fence in the lead-up to the election, move forward and commit to property transactions," Golding said.

Encouragingly, he said that headline consumer inflation decelerated to 4.6% in July from 5.1% in June, much lower than forecast.

"Overall price pressures have been easing for some time now, reinforcing expectations that the Reserve Bank will cut interest rates by at least 50bps and possibly even 75bps before year-end, with the first cut anticipated in September (2024).”

According to the Pam Golding Residential Property Index, national house price inflation continues to rebound, rising to +4.7% in July (2024) – a level last seen in February 2022, having risen steadily from a low of +2.4% in Q3 2023.

The Index reports that, contributing to the national recovery, house price inflation (HPI) in the two lower price bands below R1 million and R2 million, continued to accelerate in July 2024, rising to +8.7% and +3.4% respectively.

While sectional title HPI is experiencing a robust recovery, rising to +3.6% in July, a data revision reveals that freehold HPI also strengthened last month, with growth of +4.1% marginally outstripping sectional title house price inflation.

"While the Western Cape remains the standout performer, we have also already seen increasing activity and interest this year and during recent months in various other key metropolitan hubs and sought-after nodes around the country across all sectors, including but not limited to the high-end of the residential market," said Golding.

“All major metro markets are showing signs of recovery, with Cape Town enjoying the strongest growth during the year to date (+2.9%), while national housing market activity has normalised and shown tentative signs of recovery in Q2 2024 as purchasers continue to buy and sell for all the usual reasons.

Pam Golding said that another positive is the strong growth in investment demand since the pandemic, but particularly over the past 18 months, to levels last seen in 2009.

Demand for investment/buy-to-rent properties – which peaked at 12.9% of all ooba mortgage applications in February 2024, stood at 12% of all ooba applications last month (July 2024).

“At a regional level, the recovery is being partly driven by a turnaround in the Gauteng and KwaZulu-Natal regional markets. In terms of house price inflation, the average purchase price in both Johannesburg and Tshwane has strengthened in recent months, suggesting that a return to positive territory - compared to year-earlier levels - is likely later this year."

Golding said that activity in the areas north of Durban is also rebounding and we have already seen an uptick in interest as the market anticipates interest rate cuts.

"La Lucia and uMhlanga remain sought-after areas, particularly the residential estates. We also anticipate more movement along the uMhlanga beachfront where investors can enjoy good returns and are also expecting uMdloti to have a good run as this is an ideal market for Johannesburg businesspeople seeking to own property rather than renting when they travel to KZN."