Best news for South African homeowners in years

South African house prices are increasing at the fastest rate in over two years, growing at an average of 2.2% in April compared to 2% in March. 

This was revealed by FNB’s House Price Index, which outlined trends within South Africa’s residential property market and factors influencing house prices. 

FNB senior economist Siphamandla Mkhwanazi said that the increase in home values indicates improved demand for residential properties in South Africa. 

This is driven by improved consumer fundamentals, such as lower inflation, improved wage growth, and lower borrowing costs. 

However, interest rates remain elevated compared to their pre-pandemic levels and remain a constraint on residential property activity. 

Mkhwanazi explained that, according to data from the deeds office, housing market activity remains significantly below pre-pandemic levels. 

Transaction volumes within the market remain around 16% below pre-pandemic levels in 2019, with South Africans hesitant to take on debt to purchase properties. 

Mkhwanazi said this is in contrast to the sentiment of market participants, with FNB’s data pointing to increased positivity from estate agents. 

Estate agents reported a surge in positive sentiment, with activity ratings reaching a three-year high in the first quarter of 2025. 

However, market outcomes are still modest, as reflected in slow transaction volume growth and slightly longer selling times, with houses taking around 12 weeks to sell.

Mkhwanazi explained that the improved sentiment of estate agents is likely due to South African homebuyers turning to more traditional and sustainable forms of credit to purchase properties and make downpayments. 

There has been a noticeable reduction in South Africans relying on unsecured credit to make deposits on property purchases. 

Instead, buyers increasingly use personal savings, indicating that financial pressure on individuals has eased to provide them with more disposable income. 

However, under the new two-pot system, in some cases, these deposits have been paid for using savings from retirement accounts. 

While this allows buyers to fund deposits without resorting to high-interest-rate debt, it also negatively impacts their retirement outcomes.

The graph below shows the uptick in the FNB House Price Index so far in 2025. 

Headwinds persist 

The index, on the surface, shows the beginning of a recovery in the housing market, with South African homeowners set to benefit from rising demand pushing values higher. 

However, FNB’s index is measured in nominal terms, so it does not account for inflation. On an inflation-adjusted basis, the index is still in negative territory. 

While this is a far better position than it has been in the past few years, it still means that, on an inflation-adjusted basis, housing market activity is declining year over year. 

The last time the FNB House Price Index was in positive territory was in 2021 and 2022 when the Reserve Bank cut rates sharply to boost the economy. 

The Reserve Bank has cut interest rates by a cumulative 75 basis points in its current cutting cycle, providing some relief for South Africans.

Mkhwanazi said this has led to a gap building between the sentiment of market participants and the reality of the market. 

Buyers remain very cautious due to a significantly higher cost of living compared to the pre-pandemic era and rising uncertainty. 

Many prospective buyers, particularly in the affordable segments, may still face significant hurdles in the home-buying process related to affordability.

Mkhwanazi said the recent dip in consumer confidence due to rising global and domestic uncertainty is likely to disproportionately impact the affluent segments, potentially leading to slower sales and price stagnation.

However, he believes that the challenges created by rising uncertainty will dissipate over time and result in affluent buyers returning to the housing market relatively quickly. 

In the affordable end of the market, FNB thinks that the potential interest rate cuts by the Reserve Bank later in the year, and a potential 10% increase in the transfer duty threshold, could stimulate demand in that market.

Overall, this should push demand towards more affordable housing options amid increased uncertainty.