House price growth may have troughed in the past three months of 2023, but weak house price growth was expected to continue for a little while amid heightened uncertainty, FNB senior economist Siphamandla Mkhwanazi said yesterday.
The FNB House Price Index showed growth of 0.8% year-on-year in December, marginally higher than 0.7% in November, and a low of 0.5% in October. This meant house price growth would likely average 1.5% in 2023, in line with expectations, the bank said in its latest FNB Residential Property Barometer.
The uncertainty was due to the potential impact of the election cycle, the possibility of further fiscal slippage on current stability, heightened geopolitical tensions, biosecurity risks as well as adverse weather that may complicate the slowing inflation increase trend.
“This could cause interest rates to remain high for longer than we currently anticipate, and extend prevailing market weakness,” said Mkhwanazi.
Nevertheless, the bank believed a modest uptick in interest rate sensitive segments of house prices could be supported from the second quarter due to the slow decline in inflation and borrowing costs combined with some employment gains.
FNB’s Estate Agents Survey for the fourth quarter also suggested home buying activity levelled out and showed a marginal uptick.
“Forward-looking indicators suggest the increase in activity might be short-lived, with agents focusing on the affordable market turning relatively pessimistic on the near-term outlook. While part of this is due to seasonality, concerns around affordability, the cost of living, and lack of job security were cited as main cause for concern,” said Mkhwanazi.
In addition, the normalising semi-gration trend may also have influenced agents’ outlook on the Western Cape market, weighing on overall market expectations, the bank said.
Market activity in the Estate Agents’ survey ticked up marginally to a 5.3 rating in the fourth quarter from 5.1 in the third quarter.
Nevertheless, the rating was below the 5.9 long-term average and considerably (28.2%) lower than the most recent peak of 7.1 in the fourth quarter of 2020.
Sentinel Homes managing director, Renier Kriek, said there had been a “bit of a property boom after the country emerged from the Covid lockdown”. Since then, people had been held back from buying and selling property by various factors, which he expected was about to change for the better.
“In South Africa, property buying and selling have dropped steadily since 2021. In 2023, market volume was about 5% lower than 2019,” said Kriek.
Factors driving this included negative consumer sentiment due to load shedding, the logistical backlog, a stalling economy, high inflation, the rising cost of living, and a 475 basis point increase in the lending rate since the Covid lockdown ended.
However, people's life circumstances continue to change, suggesting pent up demand building below the surface.
The number of first-time buyers had also decreased significantly, again implying that unsatisfied demand exists, which is building up in the background, he said.