SA property market set for big rebound in 2024
2024 has got off to a galloping start with ABC International Real Estate offices across the group receiving more purchaser activity over the festive season than in recent years!
The local property market will see a resurgence in 2024 predicts Dean Gabriels, managing director at ABC International Real Estate. "Following a post-Covid lockdown property boom, the market experienced a slowdown due to various factors hindering property transactions." Gabriels notes, "Since then, individuals have been constrained from buying and selling property due to several factors, but positive changes are on the horizon."
Factors Influencing the Local Property Market
South Africa witnessed a steady decline in property transactions since 2021, with market volume in 2023 being approximately 5% lower than in 2019. Negative consumer sentiment, stemming from issues like load-shedding, a national logistical backlog, economic stagnation, high inflation, the rising cost of living, and a 475 basis point increase in the lending rate since the end of the Covid lockdown, contributed to this decline.
Despite these challenges, shifting life circumstances suggest an underlying pent-up demand. The decrease in first-time buyers, a reliable indicator of market demand, implies latent demand, hinting at a buildup beneath the surface.
Outlook for 2024
Two key events suggest a positive shift. Economists predict a likely mid-year reduction in interest rates by the South African Reserve Bank (SARB) in line with the expected move by the US Federal Reserve, as inflation slows. Additionally, the upcoming general elections, potentially leading to a national coalition government for the first time, offer new prospects for resolving the nation's challenges.
Gabriels is optimistic that these events will unleash the latent demand for property, leading to a significant increase in market activity. He states, "We'll witness a dramatic surge in market activity."
Smart Money in the Market
Currently, the market sees a substantial presence of smart money - individuals aware of the opportune time to buy and actively seeking value. Mortgage loan interest rates have notably decreased, driven by competition among banks and the fact that these savvy buyers generally possess higher wealth, superior credit records, or present lower credit risks.
Despite banks being willing to lend up to 105 percent of the purchase price, smart money buyers are consistently offering higher deposits. Wealthy foreign buyers are also capitalising on this trend, acquiring luxury properties in Cape Town and other coastal areas with price tags exceeding R20 million.
This trend is sure to continue into 2024 as smart money looks to acquire more assets before the market turns on the two main positive signals expected for later in the year.
Smaller properties
Another continuing trend in 2024 will be smaller plots and smaller properties. High construction costs make it very difficult to create new stock that competes with existing stock in the market, though this shortfall is being rapidly eroded in coastal areas, specifically Cape Town and its surrounds. So, both tenants and buyers will have to adapt to reduced living space unless they can afford to build their own at a premium.
Timing the Change
Gabriels predicts that the dam of pent-up demand will burst in the upcoming months. In response to the increased demand, sellers are strategically capitalising on favourable selling conditions by placing their properties on the market to maximise returns. The upcoming national elections serve as an additional catalyst for this ongoing trend among sellers, given the heightened volatility typically observed in the property market leading up to significant events.
If you're interested in understanding more about property trends in your area or contemplating a transaction, whether you're starting your journey as a homeowner, an experienced real estate investor, or simply staying informed about the latest market dynamics, ABC International Real Estate is poised to assist as your primary resource.
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