Property Market Predictions for 2024.

As we look ahead to 2024, the landscape of South Africa's property market is undergoing a significant transformation. The first two months of 2023 witnessed a notable deceleration in nominal housing prices, starkly contrasting the boom observed in 2020/21. 

The Rode's Report on the South African Property Market points to several factors contributing to this shift, including a weakening economy, a higher cost of living, and the repercussions of successive interest rate hikes since November 2021. We take a closer look at these factors and forecasts that may project why there are still reasons to remain optimistic.

Housing Prices Aren't Growing

According to the report, nominal prices in the housing market have grown by a mere 2.5% in the initial months of 2023, a considerable drop from the 4.2% recorded in 2022. The report suggests that this trend will likely persist, with slow growth anticipated for 2023 and 2024. Factors such as slow economic growth, financial strain on consumers due to inflation (driven by global influences), rising interest rates, high unemployment, and escalating utility costs contribute to this continued stagnation.

Problems with Rising Utility Costs

One significant concern impacting homeowners and property companies is the ongoing electricity crisis. The costs associated with persistent load-shedding can only partially be shifted to tenants, placing an additional burden on property owners.

Real Estate Investment Trusts (REITs) are also affected, as these costs eat into their earnings and dividends. The electricity supply crisis is a substantial headwind for the overall economy, further dampening expectations for a swift real house price growth recovery.

Employment & Interest Rates

The Rode's Report highlights the intertwined challenges of high unemployment and rising interest rates. The prime interest rate, now at 11.25%, has surged from the 7% rate implemented during the Covid-19 pandemic to support households. 

Nine consecutive interest rate hikes since November 2021 have resulted in a notable increase in monthly mortgage instalments. For instance, a R1 million, 20-year loan now requires a monthly mortgage of R10,492 instead of the previous R7,752. This shift places additional pressure on homeowners already grappling with economic uncertainties.

What's the Good News?

Despite the sombre outlook, a glimmer of hope is on the horizon. The recent financial results of REITs, particularly those exposed to retail and industrial properties, exceeded expectations. While exposure to the office market dragged down results for some, this positive performance suggests that specific segments of the real estate sector are resilient even in challenging times.

Many property experts emphasise that, after another anticipated interest rate hike in March, property prices are expected to increase by 2.75% to 3.5% on average. However, in real terms after inflation, this still translates to a decline in property prices. 

Homeowners facing financial pressure to meet bond repayments are advised to proactively engage with their banks to explore options for expense reduction. Selling in the current environment, especially for those with a substantial bond relative to property value, is not advisable.

Future Prospects

Looking ahead, the report underscores that the decline in the growth of house prices is unlikely to be short-lived. Economic slumps and challenges with dysfunctional and indebted municipalities are expected to contribute to continued sluggish growth in the property market.

There is cautious optimism as the interest rate hiking cycle is projected to conclude around mid-2023. However, the report suggests that these economic challenges will continue to impact the real estate landscape. Buyers with the means to invest are encouraged to explore the current market, as the conditions offer good value opportunities. 

Bank lending remains positive, with competitive rate concessions providing additional incentives for potential buyers. Hard times force lenders to offer more reasonable restrictions to loans, and as such, there are still opportunities for new homeowners to enter the market, provided they do their due diligence.

Contact Ikonic Real Estate today.

For Real Estate professionals you can trust and rely on for industry-related expertise, contact us below for more information.

If you are looking to live in Silver Lakes Golf and Lifestyle Estate, Silver Stream Estate, Lombardy Estate & Health Spa, The Ridge Estate, Six Fountains Estate, or Willow Acres Estate and surrounding areas, then Ikonic Real Estate is your preferred property practitioner to assist you in all aspects of the selling and buying process.

Office Number: 083 452 5599
Cell Number: 083 452 5599
Email: martin@ikonic.co.za

Ikonic Real Estate holds a Fidelity Fund Certificate issued by the Property Practitioners Regulatory Authority