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Real Estate on the Runway in 2024: South African Market Predictions

Source: Chas Everitt International | Friday, 24 November 2023, 11:17

Real estate on the runway in 2024

As the new year approaches, the South African real estate market is predicted to experience a revival, primarily due to two key factors: a drop in the repo rate leading to lower mortgage rates and a stronger Rand.

Lower Mortgage Rates and a Stronger Rand

The South African Reserve Bank (SARB) has kept its repo rate on hold at 8.25% this week, but an increase in the inflation rate means there is still a possibility of another increase in January. This potential rate increase would not only combat inflation but also shift the differential between South African and US interest rates closer to the 3.5% gap reached two years ago. A bigger gap makes South Africa more competitive in attracting foreign investment, strengthens the Rand, and lowers inflation.

Many investors have already increased their appetite for emerging markets like South Africa because they believe that the US interest rate hiking cycle has ended. This bodes well for a stronger Rand, greater economic growth and job creation, and for increasing consumer confidence.

Improving Consumer Confidence and Alternative Energy

Increasing consumer confidence is a critical component of a healthy property market, and it will be further improved as the use of alternative energy by businesses and households increases and load shedding becomes less severe. Consumer price inflation in South Africa is expected to slow more this year and to settle at around 4.5% in 2024, which is the midpoint of the Reserve Bank’s target range. This will further relieve many households struggling to make ends meet and enable many more to qualify for home loans.

Global Economic Picture and Conflict Risk

There is a possibility that the global economic picture could change rapidly if conflict deepens in the Ukraine and/or the Middle East. This could create food and fuel shortages that would once again raise inflation all over the world and limit consumer appetite for new real estate purchases either in their home countries or internationally. A general election in South Africa could also disrupt the market for several weeks and make some buyers more cautious as they wait for the outcome.

Affordability and Inventory

As things stand now, affordability will improve and be less of a constraint on home purchases as interest rates start falling. At the start of the year, there will also be plenty of inventory for astute buyers and investors to choose from, as those homeowners who have ‘run out of runway’ after the trials of the past few years are forced to sell.

Downward Pressure on Prices and Home Loans

This will put downward pressure on prices for at least the first half of 2024, and serious sellers will need to be very careful not to overprice. In fact, home price growth is anticipated to remain below 5% in 2024. However, the demand will definitely be there, especially in the R600,000 to R5 million price range, and home loans will also be readily available to those with clean credit records.

Market Above R5 Million

The market above R5 million will also improve, albeit more slowly, as high net-worth individuals increasingly realize that South African luxury homes are extremely well-priced and offer exceptional value worldwide. Chas Everitt is doing their part to promote this awareness through their membership of Leading Real Estate Companies of the World, exposure of luxury South African properties in global media, and strong relationships with the top real estate brokerages in more than 70 other countries.

Rental Sector and Commercial Real Estate

Turning to the rental sector, demand is expected to remain high and ensure good returns for investors, especially in the best-performing R7,500 to R12,500 a month category, provided that landlords remain extremely vigilant when vetting tenants. In the commercial real estate sector, specialized warehousing in strategic locations between city centers is becoming an increasingly profitable investment due to the high growth in online purchasing.

Issued by Chas Everitt International

Orginal article: Link To Article – provided by Kansas City Realtors