South Africa

Is SA on the edge of a property market upswing?

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A magnifying glass magnifying "Interest rate" on a newspaper

Property sector insiders think South Africa’s real estate market could be turning around at last.

Major lender BetterBond reported a 7.8% increase in bond applications in the first quarter of this year, while ooba measured an 8% increase in application volume – adding that applications were still 25% below Q1 2022, and about 9% below the same time last year.

BetterBond also reported that house prices were up 7.2% year on year over that period, meaning that prices have beaten inflation for two quarters in a row.

A return to growth this year would be very welcome for the sector after a difficult 2023.

Interest rates could prevent a market rebound

But the biggest obstacle to a housing market recovery this year is high interest rates – and the chance of a rate cut this year is falling. The South African Reserve Bank’s April Monetary Policy Review said the current 8.25% repurchase rate is consistent with economic conditions, adding that inflation isn’t expected to fall to the middle of the target range until Q4 2025. The Bank’s current projection is that interest rates will fall by just 0.25% over the next 12 months.

Central banks around the world are always likely to take their cue from decisions by the United States Federal Reserve – and at the moment, those also point away from near-term rate cuts. Last week, the Fed kept interest rates unchanged, saying it would take longer than expected to bring inflation under control.

A lot of property market optimism has been built on the assumption that rates will come down later this year, so much rides on whether the SARB keeps them elevated. However, the upswing in activity this year could be a sign that the market has adapted to higher interest rates and that fewer people are delaying purchases until they come down.

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