House price growth in South Africa may have reached its trough, and the sector could see a modest lift in demand and property prices from the second half of 2024.
This was revealed in the latest FNB Residential Property Barometer, which said that annual house price growth averaged 1.5% in 2023.
The FNB House Price Index growth averaged 0.8% year-on-year in December, marginally higher than the 0.7% in November and a low of 0.5% in October.
The marginal uptick in the last three months of 2023 signals that price growth may have reached its trough.
However, weak house price growth is expected to continue amid heightened uncertainty in the country.
FNB said the potential impact of the election cycle, the possibility of further fiscal slippage on currency stability, heightened geopolitical tensions, biosecurity risks, and adverse weather patterns complicate the deceleration trend in inflation.
This could prolong the lift in inflation expectations away from the Reserve Bank’s target, which could cause interest rates to remain high for longer and extend prevailing market weakness.
Currently, FNB expects that interest rates have reached their peak, with a measured cutting cycle coming into view in the latter half of 2024.
“Nevertheless, persistent risks, including heightened geopolitical and adverse weather patterns, complicate the deceleration trend in inflation and could prolong the lift in inflation expectations away from the target.”
“This could cause interest rates to remain high for longer than anticipated, and market weakness would be protracted.
However, FNB’s projections of slightly lower interest rates, moderately better growth outcomes and continued employment gains should help support a modest lift in demand for property and, consequently, property prices from the second half of 2024.
FNB property strategist John Loos recently said the outlook for South Africa’s commercial property market in 2024 is cautiously optimistic, but improvements in the sector may only be reflected in 2025.