Joburg property bouncing back

South Africa’s property market is turning a corner after being dampened by the COVID-19 pandemic and high interest rates. Johannesburg, in particular, is experiencing a boom.

Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg CEO Cobus Odendaal said the market has been in a definite upturn since the May general election. 

One of the biggest factors weighing on the local property market has been the country’s high interest rates.

The South African Reserve Bank has hiked rates by a cumulative 475 basis points since November 2021, when the current hiking cycle started. This has brought the repo rate to 8.25% and the prime lending rate to 11.75%.

However, many experts have predicted that South Africa could enter a cutting cycle as soon as September, bringing much-needed relief for consumers and the local property market.

Odendaal told Daily Investor that interest rate fluctuations will always impact the market. Still, he believes that sentiment plays the biggest role in buyers’ willingness to make an offer and invest their hard-earned money.

“Since the elections, there has been a definite upturn in the market, and although we are a long way from political stability, we’ve definitely taken a step in the right direction. The same with inflation; it’s still high, but it’s turning a corner,” he said.

He said this shift in sentiment is clearly evidenced by the spike in Lew Geffen’s recent turnovers.

For example, he said Randburg’s turnover this past month was triple what it had been in previous months, and in Craighall, the monthly turnover doubled.

“I’ve also noticed that many of the people who sold their properties during the past two years to liquidate assets are now coming back into the market to purchase, and a surprising number of them are cash buyers,” he said. 

“The same with people who sold up to move abroad – we’ve started to receive enquiries from buyers looking to move back and buy property again.”

Odendaal said there is also suddenly more interest at the top end of the market with people willing to invest significant amounts in South Africa, including their savings, which is a very positive indication and bodes well for the future.

“So, with investor sentiment now cautiously optimistic, a drop in the interest rate will bolster investment appetite rather than ignite it,” he said. 

“However, it will impact the lower end of the market more than it will the top end as affordability most affects that sector.”

During this period of high interest rates, many South Africans opted to rent rather than buy, leading to a boom in the country’s rental market.

Rode’s Report on the SA Property Market for the first quarter of 2024 suggested that South Africans should rent and save the difference between their rent and what a bond repayment would have been rather than buy a house. 

Stats SA’s data showed that in the first quarter of 2024, apartment rentals in South Africa grew by 3.6%, while data from PayProp shows that property rentals grew by 4.6%.

This continued a trend of slowing rental growth since 2015, as the country’s economy stagnated, slowing demand for property. 

Rode’s report said this indicated that property owners have kept rental price increased below inflation to keep tenants and maintain low vacancy rates. 

Odendaal said that when interest rates drop again, South Africa will see more first-time buyers entering the market again, which will undoubtedly impact the rental market in certain areas. 

“But it’s also likely that more investment buyers will purchase to enter the rental arena in markets and sectors where there are currently shortages,” he said.

“This activity will set off a much-needed chain reaction all the way through to the top of the market, which is exactly what we need.”