SA’s property market strengthens, demand in luxury market grows

Recent economic developments that have given consumers’ wallets relief have resulted in South Africa’s property market recovering, with more people buying houses, especially in Cape Town.

The developments that can be attributed to consumers spending more money on houses are continuous petrol cuts, hope that interest rate cuts are on the way, absence of load shedding, amongst others.

Dr Andrew Golding, chief executive of the Pam Golding Property group says they have seen sellers, buyers and investors who had not been able to make up their minds about the property market make property transactions after the formation of the government of national unity (GNU).

National House Price inflation recovers

Golding says its Residential Property Index shows that the national house price inflation continues to rebound, rising to +4.7% in July 2024, a level last seen in February 2022, having risen steadily from a low of +2.4% in Q3 2023.

He adds that the Western Cape remains the standout performer, however, they have noticed an increase in recent months in different key metropolitan areas. There has also been an increase in demand for high-end residential areas.

“All major metro markets are showing signs of recovery, with Cape Town enjoying the strongest growth during the year to date (+2.9%), while national housing market activity has normalised and shown tentative signs of recovery in Q2 2024 as purchasers continue to buy and sell for all the usual reasons.”

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Johannesburg and Tshwane property market strengthens

He adds that there has been a strong growth in investment demand since the pandemic, but the levels they have seen over the past 18 months were last seen in 2009. “Demand for investment/buy-to-rent properties peaked at 12.9% of mortgage applications in February 2024.”

When it comes to regional markets, the turnaround is partly driven by Gauteng and KwaZulu-Natal regional markets. In terms of house price inflation, the average purchase price in both Johannesburg and Tshwane has strengthened in recent months.

Golding says there has been an increase in the Johannesburg residential property market generally, with increased buyer enquiries. Market activity in the areas north of Durban is rebounding, and he believes this could be because there are anticipations of interest rate cuts.

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Demand grows in Cape Town for luxury property

Despite difficult economic times, the luxury end of the market has strengthened, and there has been pressure placed on pricing. “Confidence has returned to the property market in this segment as it is driven by positive sentiment in respect of the improved financial conditions, local stock markets and stable government.” 

He says Cape Town has seen the most demand in luxury properties and pricing pressure is also growing due to limited stock. Houses ranging between R27 million to R66 million have been sold recently. The areas such as Paarl, Hermanus and Durbanville remain popular on the market.

They are anticipating the demand will grow as the Cape Winelands Airport is set to open in 2027 for domestic and international flights.

Another factor attributed to the demand growing is road infrastructure upgrades and new links, including the extension of the R300 from the N1 to the urban edge north of Wellington Road in Durbanville, this will form a ring road around the Cape metropole and accommodate increasing traffic volumes.

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Lower-end market still in demand

He adds they still see a demand in the lower end of the market, this is despite the market, including first-time home buyers being sensitive to higher interest rates currently applicable, the increases in the cost of living and buyer affordability.

“The banks remain supportive with a competitive average weighted concession at -0.56% and a record national loan-to-value ratio of 93.7% in July 2024.”

National applications for first-time buyers rose to 46.6% in July 2024, rebounding from 44.3% in June, with demand likely to improve further later this year.

“This anticipated rebound in first-time buyers is likely to see stronger demand for homes around the R1 million mark in urban nodes, which typically means sectional title properties.”

2025 Outlook

“There are growing expectations that the GDP (Gross domestic product) growth rate in 2025 may well surprise on the upside, which will underpin the housing market.”

He adds that the lower price bands have been the most resilient during the slowdown, so it would seem likely that the higher price bands perform better going into the recovery.

“More efficient local governments – resulting from the GNU – could trigger recoveries in housing markets which have previously been hard hit by poor service delivery. Johannesburg’s housing market in particular comes to mind, which could possibly result in a slowdown in the current semigration trend to the Western Cape.”

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