Property price growth remains resilient in the lower end of the market while early data shows significant declines in property values above R5.5 million, the latest FNB Property Barometer showed.
FNB senior economist Siphamandla Mkhwanazi said yesterday they expect house price growth should slow to around 2% this year from 3.5% in 2022, with risks skewed to the downside.
“So far, price reaction to weakening consumer fundamentals has been stronger than expected in the upper end of the market, although financial pressures are more pronounced among lower-income households,” he said.
The FNB House Price Index's annual growth decreased in May, averaging 1.9% year-on-year, down from 2.1% in April.
He said elevated living costs and higher borrowing and debt-servicing costs continue to erode affordability, particularly among lower-income groups.
The Supply index in the Barometer, derived from the bank’s property valuer’s database, had trended higher in recent months, suggesting that listings are higher on a year-on-year basis, in contrast to the Demand index.
“This is consistent with our estate agents survey results, which show that buying activity is dwindling, and the average time-on-market is stretching across the spectrum. Agents now estimate that 56% of properties listed for sale take three months or longer to sell, an increase from 33% in 1Q22,’’ said Mkhwanazi.
He said the bank had revised its economic growth expectations lower to reflect the delayed and ongoing impact of higher inflation and tighter-than-expected monetary policy.
“We now expect the economy to shrink marginally by 0.1% - 2 percentage points lower than the average growth for 2022 - reflecting weaker domestic demand,” he said.
This was based on an assumed persistence of higher stages of load shedding, as well as a drag on trade due to the constrained rail network.
“Nevertheless, growth should gather pace towards the end of the year as inflation slows sufficiently. We expect GDP growth to average 1.1% in 2024 before rising to 1.8% in 2025 as energy constraints ease,” he said.
He predicted average headline inflation of 6.2% this year, slower than 6.9% in 2022 but higher than the 4.7% average over the past five years.
“We pencil in an additional 25 basis points of hikes...in July, taking the peak to 8.5% this year. This should be followed by a gradual easing, beginning in the second half of 2024. The repo rate should reach a terminal rate of 7% by the end of December 2025,” he said.
The bank’s estate agents survey showed market activity slipped to a rating of 5.1 out of 10 in the second quarter of 2023, down from 5.7 in the first quarter.
“At this level, agent activity rating languishes just below the long-term average of 5.9 since the inception of the survey in 2004, and considerably lower than the most recent peak of 7.1 recorded in the fourth quarter of 2020, he said.
By price, the R250 000-R500 000 bracket was the best performer, with a rating of 6.9, down from 8.0 previously. Higher activity in lower priced segments was being boosted by the downscaling trend amid heightened financial pressure, with homeowners across income groups searching for cheaper alternatives.
Estate agent expectations for the housing market decreased further in the second quarter, with only 17% of respondents expecting an increase in activity in the next three months, compared to 25% in the first quarter of 2023.
Factors cited for the decline included a sharp increase in interest rates, a weaker economy, souring buyer sentiment, and disruptions to buying activity caused by load shedding.