In the coming year, two main factors are expected to drive the South African real estate market’s revival. The first key is a potential drop in the repo rate, leading to lower mortgage rates. Despite the South African Reserve Bank keeping the repo rate at 8.25%, an uptick in inflation may lead to another increase in January before we see a moderation in home loan interest rates. A stronger Rand is also on the horizon.
The reason behind a possible rate increase is not only to combat inflation but also to narrow the gap between South African and US interest rates, making South Africa more attractive for foreign investment. This could strengthen the Rand, lower inflation, and boost economic growth and job creation.
Many investors are already turning their attention to emerging markets like South Africa, believing that the US interest rate hikes are over. This positive trend is expected to contribute to a stronger Rand, increased economic growth, job creation, and higher consumer confidence.
Another crucial aspect of a healthy property market is consumer confidence, which is expected to improve further as the use of alternative energy increases, and load shedding becomes less severe.
On the economic front, consumer price inflation in South Africa is anticipated to slow down this year, settling at around 4.5% in 2024. This relief will benefit households, making it easier for them to qualify for home loans.
However, potential global conflicts in Ukraine or the Middle East, as well as a general election in South Africa, could pose risks to the positive outlook. These events might lead to food and fuel shortages, raising inflation worldwide and impacting the real estate market.
Despite these risks, the overall outlook for the South African market in 2024 and early 2025 is positive. Affordability for homebuyers is expected to improve as interest rates decline. At the beginning of the year, there will be a considerable inventory for buyers to choose from, as homeowners facing challenges from the past few years are compelled to sell.
For sellers, especially those in the R600,000 to R5 million price range, there is expected to be demand, and home loans will likely be readily available for those with clean credit records. Prices, however, may experience downward pressure in the first half of 2024, with home price growth anticipated to remain below 5%.
In the rental sector, demand is expected to stay high, offering good returns for investors, particularly in the R7,500 to R12,500 a month category. Landlords are advised to remain vigilant when vetting tenants, working with managing agents who conduct necessary credit and background checks to avoid potential problems.
In the commercial real estate sector, specialized warehousing in strategic locations between city centers is becoming a lucrative investment due to the high growth in online purchasing. If you’re considering selling your house in Port Elizabeth or exploring real estate opportunities, staying informed about these market trends is key to making informed decisions.”
