South African property market rebounds amid renewed confidence

South African residential property market is showing signs of a rebound, with 84% of respondents in the Absa Homeowner Sentiment Index (HSI) for Q3 2024 expressing confidence in its future.

The outlook follows a period of financial strain caused by a prolonged interest rate hike cycle. Recent rate cuts by the South African Reserve Bank (SARB) have sparked hope for relief among consumers. “The Reserve Bank’s decision to lower rates is a much-needed shift that provides some breathing room for the property market,” said Nondumiso Ncapai, managing executive at Absa Home Loans.

However, Ncapai cautioned that recovery would take time. “While we expect interest rates to improve further in the coming months, the economic circumstances for consumers remain strained in the short term. It will take time for tangible relief and improved cash flows to manifest,” she said.

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The Absa House Price Index revealed incremental growth in property values over the past year. Sentiment towards buying property rose significantly, with a six-percentage-point increase to 73%. Sellers also showed renewed optimism, with 48% willing to sell—up two percentage points.

“People are beginning to see the long-term value in property again,” Ncapai added. “For first-time buyers especially, this is an exciting time to enter the market.”

The survey revealed strong confidence among renters, with 83% preferring to transition to homeownership, up two percentage points from the previous quarter. “Renters are feeling more empowered to make the leap into ownership, despite current challenges,” Ncapai noted.

Investment sentiment remained resilient at 80%, reflecting expectations of future value growth in the property market. However, interest in renovations dipped slightly by one percentage point to 79%, though long-term trends suggest a 4% increase in renovation activities compared to last year.

Regional disparities emerged in consumer confidence, with inland provinces outperforming coastal areas on four out of six measures. “Inland regions are clearly benefiting from a more stable economic climate, while coastal areas are still navigating unique challenges,” said Ncapai.

The short-term rental market is also gaining traction as an alternative income source, particularly in cities with high tourist activity. “We’re seeing a growing trend of people leveraging short-term rentals for extra income, especially in today’s affordability landscape,” she added.

As the Absa HSI celebrates its 10th anniversary, it provides an increasingly detailed view of property trends, including insights into emerging innovations such as Advanced Property Solutions (APS). These tools reflect shifting preferences in home financing and investment strategies.

The commercial property sector also mirrors the broader recovery. The Clur Shopping Centre Index highlighted narrowing gaps between rental growth and inflation. “Rental growth in September stood at 3.7%, just 0.1% shy of inflation at 3.8%. This marks a significant stabilization in the retail sector,” said Belinda Clur, managing director of Clur International.

With cautious optimism taking root, South Africa’s property market appears poised for a steady recovery, driven by first-time buyers, innovative financing options, and easing economic pressures. “The property market is resilient, and South Africans are ready to seize the opportunities ahead,” Ncapai concluded.