The South African Real Estate Market in 2024

The South African real estate market in 2024 is navigating through a period of cautious optimism, characterized by a complex interplay of economic, geopolitical, and environmental factors. As interest rates are expected to have peaked, the latter half of the year might see a measured reduction, potentially invigorating the market. However, the journey toward economic stabilization is fraught with persistent risks such as geopolitical tensions and adverse weather patterns, which could challenge the anticipated easing of inflation and keep interest rates elevated for an extended period.

Despite these uncertainties, there are signs of stabilization and modest recovery in the housing sector. According to the FNB House Price Index, there was a slight increase in annual house price growth, which averaged 1.5% in 2023. The final quarter of 2023 showed signs that the market might have bottomed out, setting the stage for a gradual recovery. Nonetheless, the overall growth trajectory remains tepid, influenced by broader economic uncertainties including potential fiscal slippages and the impacts of the election cycle.

Looking forward, the anticipated slight lowering of interest rates, coupled with modest economic growth and ongoing employment gains, is expected to support a gentle uplift in property demand. This is likely to contribute to a moderate rise in property prices starting from the second half of 2024. This forecast is underpinned by a base case scenario that assumes a gradual deceleration in inflation and borrowing costs, which should reinvigorate interest-rate sensitive market segments.

In the last quarter of 2023, market activity as reported by estate agents showed a slight improvement, ending the year on a stronger note. The Estate Agents Survey indicated a small uptick in home buying activity, with the agents’ activity rating increasing marginally. This increase, however broad-based across various regions, was still below the long-term average, reflecting the market’s cautious sentiment amid ongoing economic pressures.

However, short-term expectations among estate agents are less optimistic, with fewer anticipating an increase in activity in the early months of 2024. This sentiment is particularly pronounced in the affordable housing market, where concerns about affordability and job security continue to dampen enthusiasm. Moreover, 53% of agents reported that income levels are significantly lagging behind house prices, a sharp increase from previous years, highlighting the growing disconnect between earnings and housing costs.

The average duration for which properties remain on the market has slightly decreased, indicating a somewhat quicker turnover. This improvement in transaction speeds could be a precursor to a more active market as economic conditions stabilize. However, financial pressure remains a significant factor, with a considerable portion of sales in the affordable segment driven by economic necessity rather than choice.

The South African real estate market in 2024 is poised at a critical juncture, with potential for recovery tempered by significant economic and geopolitical risks. While the market shows signs of stabilization and modest recovery, the path ahead remains uncertain. Investors and homebuyers will need to navigate this landscape carefully, armed with a clear understanding of both the opportunities and the challenges that lie ahead.

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