The latest Absa Homeowner Sentiment Index (HSI) reveals a notable uptick in consumer confidence in South Africa's property market.
This comprehensive research provides crucial insights for market players, highlighting various aspects of consumer sentiment, referred to as "subindices," such as the current timing for buying, selling, investing, buying versus renting, and renovating properties.
The index is based on responses from over 1,000 consumers, offering a customer-centric perspective.
Main drivers of positive sentiment: Property is and always has been a secure asset (58%), property always increases in value (54%) and creates long-term income (53%), high demand for rental properties (49%) and it depends on the location (48%)
Main drivers of negative sentiment: The unstable economy (67%), political instability (53%), crime (50%) and high unemployment (49%). Other mentions include property has become very expensive (44%) and buying power has decreased (41%)
Key Findings from Q1 2024
In the first quarter of 2024, a survey of 1,149 consumers revealed a positive shift in sentiment towards the South African property market.
When asked if they currently consider the property market a secure asset likely to generate sufficient long-term wealth, 82% responded affirmatively.
This marks a 4% increase from Q4 2023, indicating growing optimism despite ongoing economic challenges.
Sentiment improvements were recorded across all surveyed categories in Q1 2024. The most significant quarter-on-quarter increases were seen in buying (up 8%), investing (up 6%), and buying versus renting (up 6%).
Seller sentiment also rose slightly by 1% compared to the previous quarter. When compared to Q1 2023, these trends show consistent improvement.
Breakdown of Sentiments
Overall positive responses increased to 82% in Q1 2024, a 4% rise from Q4 2023 and a significant 9% increase from Q1 2023.
Buying Sentiment: Improved by 8% to 72% from Q4 2023 and by 11% from Q1 2023. After a downward trend since Q4 2021, buying sentiment turned upward significantly in Q1 2024. Respondents reported feeling more confident about their financial positions and affordability, driven by growing families and the need for more space.
Selling Sentiment: Increased by 1% to 49% in Q1 2024 compared to Q4 2023 and was 6% higher than in Q1 2023. Many sellers cited relocation for better employment opportunities and lifestyle needs, such as upgrading to larger homes, as primary reasons for selling. Interestingly, many had initially bought smaller homes with the intent to upgrade and sell them for additional income.
Buy vs. Rent Sentiment: Increased by 6% to 73% in Q1 2024 compared to Q4 2023 and by 12% compared to Q1 2023. Many respondents now have sufficient savings for a home deposit, while others are relocating and seeking new opportunities. Flexibility remains a key attraction for those who prefer renting.
Renovation Sentiment: Increased by 4% to 79% compared to Q4 2023 and by 7% compared to Q1 2023. Most respondents renovate to add value to their properties and enhance living spaces, while others are driven by the need for repairs and maintenance. However, the high cost of materials remains a significant deterrent.
Investment Sentiment: Rose by 6% to 82% in Q1 2024 compared to Q4 2023, the highest level since Q1 2021. This indicates that property investors believe it is an opportune time to invest for future value and returns.
These findings suggest a positive outlook for South Africa's property market, with increasing consumer confidence across various aspects of property-related activities.
Absa noted that there are some driving factors in the macroeconomic environment that may continue to raise sentiment as the year progresses and into 2025, including:
• Interest rate cuts: Inflation is expected to continue a downward trend, closer to levels where the South African Reserve Bank (SARB) would consider interest rate cuts to alleviate some pressure on those with high levels of debt. However, this is most likely to only happen towards the end of the year and to be influenced by various risks, especially food inflation related to drought.
• Reduced load shedding: Since the end of December 2023, the intense impact of load shedding has subsided and power supply has stabilised to some extent, taking pressure off households and contributing to an uplift in consumer sentiment.
It said that in general, application volumes for both home loan finance and property registrations in the National Deeds Office are still subdued. However, green shoots are emerging in some pockets of the market such as the first-time buyer and investor segments.
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