Navigating SA's property market: Elections and economic projections

In South Africa, the real estate market is showing signs of recovery, according to Harry Nicolaides, CEO of Century 21 SA.

Nicolaides notes an improvement in the rate of property sales in the first quarter of 2024 compared to the previous quarter of 2023.

Interestingly, this uptick in sales is attributed solely to optimistic market sentiment, as there have been no interest rate cuts this year.

Anticipating even higher sales activity, Nicolaides predicts that the interest rate cutting cycle, expected to commence in the second half of 2024, will further stimulate the market.

While some potential buyers and investors may be awaiting the outcome of the South African general elections on May 29, 2024, Nicolaides noted that the market is more concerned with interest rate movements.

He said that globally, bank lending rates significantly impact property prices and demand. Higher interest rates reduce affordability, decreasing demand and subsequently lowering property prices.

Conversely, lower interest rates stimulate demand and increase property prices.

Despite potential delays in decision-making around property purchases due to elections, studies in the UK and the US suggest these delays have minimal and short-lived effects on market activity.

Nicolaides pointed to the impact of the high interest rate environment globally on property sales and house price growth over the past two years, particularly in the US.

He attributed this to increased inflation rates, influenced by energy procurement constraints from the Russia/Ukraine conflict.

While South Africa faces similar financial trends, its recovery may take longer due to internal energy provision challenges and the delivery of basic utilities.

However, Nicolaides remains optimistic, noting that global indicators suggest interest rate hikes have peaked and reached stable levels. Economic analysts predict incremental interest rate cuts from the second half of the year onwards.

This positive sentiment is already reflected in the property sales market, with an uptick in sales and house price growth observed in the US, globally, and in South Africa.