South African homeowners are increasingly downsizing due to the high interest rate environment.
The FNB House Price Index showed a year-on-year increase of 0.5% in June, up from 0.3% in May.
The financial services firm said that the modest growth in house prices is in line with expectations given the ongoing high costs of living and borrowing.
It noted that the lower-priced market segments and non-metro areas continue to show better performance. Indicators suggest a potential stabilisation in supply and demand dynamics following a period of decline.
The group's Estate Agents Survey, taken over the election period showed a market negatively impacted by election concerns and various affordability constraints.
Market activity ratings fell to an average of 5.6 in the second quarter of 2024, below the long-term average of 5.9.
However, this latest figure is above recent lows, indicating a possible market bottoming out.
The slowdown is consistent with agents' expectations and highlights buyer hesitancy due to election uncertainty.
The survey also examines the reasons behind property sales, with downsizing being a common theme.
Downscaling due to life stages, such as moving into retirement homes, remains the most common reason in South Africa, accounting for 22% of all sales.
Sales driven by financial pressure increased slightly to 21% of total sales in Q2, aligning with historical averages and indicating a trend of sellers motivated by high debt servicing costs.
Notably, the survey also shows that financially pressured sellers prefer to downsize rather than rent, reinforcing the ongoing trend of buying smaller homes.
Internal relocation within South Africa (semigration) remained steady at 14%, still above the long-term average.
Upgrading activity, however, dropped significantly to 11%, reflecting homeowners' cautiousness in the current high-interest rate environment.
Sales due to emigration remained unchanged at 8%, moving away from the peak levels seen in 2019.
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