Best news for homeowners in a decade

South Africans are the most confident they have been in a decade about the future of residential property, with Absa’s Homeowner Sentiment Index (HSI) hitting 87% for the fourth quarter of 2024. 

Absa’s HSI was first developed in 2015, with it aiming to present market players with an understanding of the overall confidence level of consumers. 

The index tracks over 1,000 consumers after it was broadened in 2023 to include smaller provinces in South Africa and gain insights regarding the uptake of alternative power solutions. 

Absa’s report revealed that aside from a surge in confidence, the dominance of first-time buyers in the market relative to other segments is an ongoing trend.

“This result bodes well for the outlook of the property market into 2025 and is indicative of the resilience of South African consumers,” the managing executive of Absa Home Loans, Nondumiso Ncapai, said.

Sentiment to buy and invest in the property returned strong results in Q4 2024, while confidence to sell surpassed the 50% mark after trailing below this midpoint for the last two years.

Buyer sentiment improved to 77% in Q4 2024 from 73% in the previous quarter and has been on an upward trajectory since the second quarter of 2023.

Selling sentiment grew to 51% from 48% in the third quarter of 2024, with some respondents who sold in the last 12 months saying they needed to free up funds.

Investing sentiment rose 5% to 85% quarter on quarter – the strongest growth across the survey’s key metrics. Investors feel now is the time to expand their portfolios as the economy is showing signs of recovery.

This recovery has largely been driven by the relief provided in the form of interest rate cuts, with the Reserve Bank reducing rates by a cumulative 75 basis points since September 2024. 

“Recently, there has been some relief from an interest rate perspective for consumers, with one 25bps rate cut made in January and another forecasted in March,” Ncapai said. 

“There is also positive movement in House Price Indices, including the Absa House Price Index, which is likely to spur the property market’s gradual recovery into 2025.” 

“While we continue to monitor key developments in the geopolitical arena as well as within our own country’s government of national unity, we remain optimistic about the prospects for South African consumers and businesses in the real estate environment.”

While South African consumers are only just beginning to recover financially from the nation’s recent cost-of-living crisis, the aspiration of homeownership remains strong, Ncapai said. 

Some key trends were also apparent in Absa’s report, with first-time buyers driving buying activity alongside investors. 

In 2024, first-time buyers accounted for 53% of property registrations, Absa said. They now also make up around 12% of the entire market. 

The index also showed that there has been a noticeable rise in buy-to-let property investments, which now take up 12% of total market activity. 

Confidence among property investors is the highest it has been since 2016 in the Absa HSI, with many feeling optimistic about an economic recovery in South Africa. 

This trend shows that households with stronger balance sheets are seeking alternative investments to generate additional cash flow.

Absa also flagged a rise in the number of solo female homeowners who were applying to purchase houses among first-time buyers. It said this subgroup is becoming a key driver of property market activity. 

One trend that has reversed is the demand for alternative power solutions to reduce energy costs and make a property immune to load-shedding. 

The appetite for these solutions has shown a decline as load-shedding has been significantly reduced in the past year.

However, Absa expects demand to remain strong as these solutions are critical to reducing electricity costs in the long run. 

Positivity in the property market can also be seen in FNB’s House Price Index, which accelerated to 1.2% in January. A positive reading on this index indicates growth. 

While still subdued, this marks the index’s highest growth rate since June 2023, supported mainly by easing financial pressure on South Africans and reduced interest rates.

FNB economist Siphamandla Mkhwanazi pointed out that the recovery has not been as strong as initially expected after several interest rate cuts from the Reserve Bank. 

Mortgage lending conditions have shown a modest improvement, with the average loan-to-value ratio rising to 95.1% in the fourth quarter of 2024. 

This signals cautious optimism among lenders and buyers as banks gradually loosen lending standards in response to an improving economic backdrop.