South Africa’s Housing Market See Slow Growth Despite Improved Market Conditions

The South African housing market is showing promising signs of recovery, with increased buyer activity and growing optimism. However, despite these positive indicators, house price growth remains subdued. The latest data from the FNB House Price Index (HPI) reveals a modest increase, highlighting a slow and steady recovery in the property market.  

Understanding the FNB House Price Index

The FNB House Price Index is a key barometer of the health of the South African housing market. It tracks changes in residential property prices based on data from home loan transactions by FNB. The index provides valuable insights into market trends by measuring the average price of homes, adjusted for seasonal and outlier variations. Updated monthly, it offers both nominal and real price changes, covering various property types and segments, including metro and non-metro areas.

Slow but Steady Growth in SA Housing Market

According to John Loos, Senior Economist at FNB Commercial Property Finance, the HPI averaged 0.8% in November, slightly down from 0.9% in October. This indicates that house prices are not experiencing rapid growth, despite the improved market conditions.

Loos attributes the slow growth to several factors, including cautious buyer behavior and affordability concerns. While buyer activity has increased, market forces have yet to generate significant upward pressure on property values.  

Positive Market Indicators

Despite the slow price growth, there are several positive indicators in the market:

• Increased Market Activity: The FNB Estate Agents Survey has reported a surge in activity across key regions, including Gauteng and the Western Cape. This increased activity is reflected in a reduction in the time it takes to sell property.
• Improving Sentiment: Loos notes that improving sentiment is driving the market recovery. Anticipation of further interest rate cuts is also contributing to the positive outlook.
• Stronger Economic Outlook: Easing inflation, declining borrowing costs, and improving real incomes are creating a more favorable environment for potential buyers.

Affordability Remains a Key Concern

Despite the positive trends, affordability remains a significant challenge for many buyers, particularly in the lower-priced segments. This is reflected in the subdued levels of mortgage extensions.  

Cautious Optimism for the Future

Loos maintains a cautiously optimistic outlook for the housing market. He believes that several factors, including easing inflation, declining borrowing costs, and improving real incomes, will drive growth in the coming years. Consumer sentiment is also strengthening, providing an additional boost to the market.  

House price growth is projected to average 0.8% in 2024, before climbing to 1.7% in 2025 and approaching 3% by 2026. This gradual growth trajectory reflects the current market dynamics, where cautious buyer behavior and affordability concerns are tempering the impact of positive economic factors.  

The South African housing market is poised for a steady recovery, albeit at a measured pace. While challenges remain, the overall outlook is positive, with several factors supporting sustained growth in the years to come.

Also read: Your Complete Guide to Buying a House: From Search to Settlement