The latest FNB House Price Index (HPI) indicates a subdued mood in South Africa’s residential property market, despite some improvements.

Recent interest rate cuts and reduced financial pressure on households have not yet impacted the HPI, and their effects may take time to reflect.

This suggests house prices will likely remain lower on average in 2024, with a potential recovery starting in 2025 and 2026. The HPI showed a slight decrease to 0.8% in November, down from 0.9% in October and 1.0% in November 2023.

FNB forecasts a 0.8% average growth in house prices for 2024, with an expected rise to 1.7% in 2025 and closer to 3% by 2026.

In real terms (adjusted for inflation), the HPI remains negative. Notably, earlier data revisions suggest that house prices bottomed out in June, aligning with initial expectations and showing signs of market recovery.

Improved sentiment and expectations of further rate cuts should stimulate demand, particularly in more affordable segments.

However, FNB noted that despite increased buyer interest, market conditions have not generated strong upward momentum in property values.

As a result, mortgage growth remains low, averaging 2.8% year-to-date compared to 5.7% in 2023.

FNB maintains a cautiously optimistic outlook, supported by lower inflation, declining borrowing costs, rising real incomes, and stronger consumer sentiment.

Most common reasons for selling

In recent quarters, financial pressures and life-stage downscaling have remained the dominant factors behind property sales in South Africa.

The latest data shows that retirees downsizing to smaller homes accounted for 22% of total property sales, while sales driven by financial strain slightly increased to 23%. This reflects the ongoing economic challenges faced by many households.

The proportion of sales driven by financial pressures remains above the long-term average of 18%, reinforcing a trend of buyers opting to downscale rather than rent.

These sales continue to highlight the persistent strain on household finances, as more South Africans look to reduce living costs by moving into smaller properties.

Meanwhile, relocation within the country remained steady at 14%, exceeding the long-term average of 9%.

Upgrading activity, however, slowed to 10%, a result of the cautious approach many homeowners are taking toward incurring additional debt in the current high-interest-rate environment.

Emigration-related sales saw a slight decline from 8% to 7%, a far cry from the peak levels observed in 2019.