Good news for South African homeowners 

Forming a Government of National Unity (GNU) for South Africa has boosted the country’s housing market outlook, which is good news for homeowners.

Payprop said the GNU has investors and property professionals looking forward to a period of greater stability and stronger housing and rental prices.

“On 14 June 2024, South Africa’s political leaders agreed to the broad alliance, which saw asset prices grow sharply and strengthened the rand,” the organisation said. 

“While housing prices tend to be slower to react to the headlines, estate agents believe they should follow suit.”

John Herbst, CEO of Fine and Country Sub-Saharan Africa, said a stronger currency goes hand in hand with stronger house price growth. 

South Africa may already see signs of a recovery, with the May Lightstone Housing Index showing that year-on-year house price inflation reached 3.22%. 

While this is still sluggish, growth has now accelerated in each of the past four months. Meanwhile, monthly house price growth rose to 0.42%, close to the peak it reached in late 2020.

Herbst further explained that the stability and economic growth that are expected to come with the GNU could encourage the South African Reserve Bank (SARB) to start cutting interest rates. 

“The Monetary Policy Committee’s (MPC) last statement in May was the most positive for some time despite the decision to hold rates steady,” he said.

Property experts are now more hopeful for a 25 basis point interest rate cut at the meeting in September. 

Herbst said a fall in bond interest rates could encourage more buyers back to the housing market after a prolonged period of low activity.

Regarding the rental market, the PayProp Rental Index for Q1 2024 showed that rental growth, while still in effect, fell for the first time since 2021 to 3.8% from 4.6% in the previous quarter. 

An uptick in economic growth could help lift rental growth again, but for now, high inflation and interest rates have reduced tenant affordability and limited rent increases. 

“Those pressures are likely to persist. Inflation isn’t expected to reach its 4.5% target until Q2 2025,” he said. 

“On the other hand, high interest rates are helping to shore up rental prices as they deter first-time buyers, and it is still possible that rental growth could rally.”

Positive signs

Standard Bank noted a resurgence in first-time homebuyer activity in South Africa in recent months. 

The bank found that demand for property among first-time buyers in South Africa is picking up, which could drive up the price of homes in the country as buyers anticipate interest rate cuts. 

In May, nearly half of all home loans registered by the bank were taken by first-time buyers following an uptick in the volume of applications in April and May. 

This follows a notable decline in demand from first-time buyers throughout 2023 and the beginning of 2024. 

The bank said the demand increase is potentially driven by expectations of imminent rate cuts as inflation trends downward. 

Standard Bank’s data indicates a recovery in the first-time homebuyers’ market since the first quarter when the Ooba Home Loans’ barometer indicated that the proportion of applications from these buyers had dropped to a low of 46%.

“The past three years have been challenging for homeowners,” said the head of Standard Bank Home Services, Toni Anderson.

“As the largest financier of first-time buyers and housing in South Africa, we promptly implemented support measures for our home loan customers.”

These measures included loans that offer more than 100% of the purchase price to first-time buyers to help them cover upfront costs, such as bond registration and transfer fees. 

“At Standard Bank, first-time buyers now qualify for up to 108% subject to risk assessment offers. This also shows that first-time buyers need more help to cover upfront costs,” said Anderson.