There is growing optimism in South Africa’s residential property market, says Paul Stevens, CEO of Just Property.
The economy shows signs of recovery, with inflation falling from 5.3% in early 2024 to 3.8% by October, within the target range of 3-6%. This decline has led the South African Reserve Bank (SARB) to reduce interest rates twice in recent months.
“While these cuts were smaller than expected, they signal a trend that should relieve consumers,” Stevens said, forecasting at least a 1% interest rate reduction in 2025, easing financial pressures and boosting market activity.
The formation of a Government of National Unity (GNU) after the May 2024 elections has strengthened South Africa’s currency and public sentiment. Stevens believes the GNU has given people and investors hope for the future, though he acknowledges challenges, such as reducing state employees while addressing high unemployment.
The government's handling of these issues will be critical for sustaining momentum.
Trends:
Semigration continues to shape the market, with coastal towns like Langebaan, Hermanus, Plettenberg Bay, and St. Francis Bay drawing buyers. Stevens noted
the Western Cape’s property prices rose 39% from 2019 to 2023, while the Eastern Cape’s Gqeberha is emerging as a hotspot, driven by infrastructure investments. Property prices in KwaZulu-Natal increased 19%, with most growth on the north coast in areas like Umhlanga, Ballito, Salt Rock, and Umdloti.
Security estates and sectional-title properties are gaining popularity due to safety and affordability concerns. “While freehold properties still constitute a significant portion of the market, the shift towards sectional-title units and estates is gaining momentum.”
The luxury market remains strong, with cash buyers fuelling demand across key regions. “This segment is resilient, driven by local and international buyers,” Stevens said.
The rental market is experiencing strong growth, with national rental inflation at 4.8% in Q3 2024. “On average, tenants now spend less than 30% of their income on rent,” Stevens said, thanks to wage growth and declining debt burdens.
Vacancy rates remain low, benefiting landlords, but Stevens advises against overpricing, urging, “Landlords should focus on retaining good tenants at fair, market-related rentals.” The Western Cape leads with 9.3% rental growth, while Gauteng and Mpumalanga lag behind.
The buy-to-let market remains active, with decreasing interest rates and low vacancy levels creating favourable conditions. “It’s a good time to expand portfolios, but due diligence is essential,” Stevens noted.
Coastal cities, particularly Cape Town, continue to attract international buyers, along with smaller Western Cape towns like Hermanus and Plettenberg Bay.
Affordability remains a challenge for first-time buyers. “Save towards a 10% deposit and get pre-qualified by a mortgage consultant before you start looking.” Stevens warned that neglecting planning led many first-time buyers to face financial difficulties when interest rates increased after the low 2020/21 rates.
Municipal service delivery remains a risk for investors, as poorly maintained services can affect property values. Stevens cautioned: “If infrastructure in an area is deteriorating, property values are unlikely to increase, and may even decrease. Investors should carefully assess infrastructure reliability.”
Stevens is optimistic about the property market, saying, “We are moving into an ideal property investment cycle,” driven by decreasing interest rates and economic improvement. “Consumers will gradually see relief after years of pressure, making the year ahead look promising for the market.”
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