House price growth slows in September: Insights and trends you need to know

South Africa's real estate market has been through a series of ups and downs in recent years, influenced by a myriad of economic and social factors. As we delve into the key themes presented in the latest FNB Property Barometer, it becomes apparent that the market is in a state of flux.

From expectations of interest rates to changes in buying activity and rental vacancy rates, it's a dynamic environment for both buyers and sellers. 

Interest Rates: A Peek into the Future

The data suggests that interest rates in South Africa may have reached their peak, with a potential easing cycle on the horizon in the latter half of 2024. This news is likely to bring relief to many homeowners and potential buyers. Lower interest rates typically make mortgage financing more affordable, which could boost buying activity.

However, there is an upside risk to this forecast. If upward pressure on food and fuel prices intensifies, and the government's fiscal position deteriorates, it could put pressure on the South African Reserve Bank to keep interest rates elevated. Therefore, while there is hope for rate relief, it is essential to remain cautious and monitor the economic landscape closely.

Buying Activity and Affordability

Buying activity in the South African real estate market has been on a downward trend, with volumes now at pre-pandemic levels. This decline can be attributed to deteriorating affordability. As the cost of living continues to rise, many potential buyers are finding it challenging to enter the market.

The data also suggests a widespread trend of downscaling, particularly in higher-priced brackets. This downscaling reflects the financial pressure faced by homeowners across income groups. Many are searching for more affordable housing alternatives, resulting in increased activity in lower-priced segments.

Rental Market Vacancy Rates

In the rental market, the declining trend in vacancy rates may be stalling. While there has been a recovery, vacancy rates remain above pre-pandemic levels, indicating an incomplete recovery. This data suggests that tenants still have more negotiating power than they did in the pre-pandemic era.

For landlords and property investors, it is important to adapt to this changing landscape and be flexible in rent negotiations. It's also essential to focus on providing competitive amenities and services to attract and retain tenants.

House Price Growth

House price growth in South Africa has been on a slowdown, with the FNB House Price Index reporting a 0.6% year-on-year growth in September. This is down from 0.8% in August. The average house price growth for the third quarter of 2023 stands at 0.9%, down from 2.1% in the second quarter.

The market strength index indicates declining levels of demand, while the supply of properties for sale has also decreased. This is a challenging environment for sellers, with two-thirds of listed properties taking three months or more to sell. Sellers should be prepared for a prolonged period of slower growth in house prices until inflation and borrowing costs ease.

Estate Agents' Optimism

Despite the challenges in the market, the results of the Estate Agents Survey for the third quarter of 2023 show some optimism. This optimism is predicated on the belief that interest rates have peaked and expectations of increased activity during the summer months.

Agents expect an increase in activity in the next three months, with 50% of respondents expressing positivity, a significant increase from 17% in the second quarter. While the overall sentiment remains subdued, less severe load-shedding and expectations of a peak in interest rates have boosted confidence.

For sellers, the market presents challenges, with properties taking longer to sell and slower house price growth. Despite these challenges, estate agents are cautiously optimistic, buoyed by the belief that interest rates have peaked and the anticipation of increased activity in the coming months.