The property market: slow recovery, but positive momentum

The South African housing market is showing some promising signs of recovery, but it's not quite smooth sailing just yet. According to the latest FNB House Price Index (HPI), house price growth remains slow, clocking in at just 0.9% in December. That’s slightly down from 1.0% in November, bringing the annual average to 0.8%—a dip from the 1.5% recorded in 2023. While this may seem underwhelming, it’s in line with expert predictions.

One of the biggest takeaways from the data is that demand for housing is slowly creeping up while the supply of properties for sale is dwindling. This shift could create a more favorable environment for property values over time. However, real house prices still appear undervalued, as many buyers remain cautious—likely due to the lasting impact of the cost-of-living crisis. Even with improving conditions, people are hesitant to take the plunge into homeownership just yet.

Encouraging signs for the future

Despite the sluggish growth, there’s reason to be optimistic. Easing inflation, declining borrowing costs, and improving real incomes all set the stage for a more vibrant housing market in the coming years. Analysts predict house price growth will rise to 1.7% in 2025 and exceed 3% by 2026 as economic conditions continue to improve.

The FNB Estate Agents Survey for the fourth quarter of 2024 echoes this cautious optimism. Market activity ratings have climbed to 6.0 (out of 10), the highest level since the fourth quarter of 2022. This suggests the market is normalizing after a period of turbulence, with a noticeable shift in growth towards middle-to-high-price segments. Improved sentiment, lower borrowing costs, and reduced financial pressure on households are helping drive this shift.

Regionally, KwaZulu-Natal and Gauteng have led the way in recovery, bouncing back from relatively low bases. However, only 54% of estate agents expect stronger market momentum in the first quarter of 2025, a slight drop from the 58% recorded in the previous quarter. Notably, agents working in the lower-priced segments anticipate the most significant boost from falling interest rates, as affordability plays a crucial role in these markets.

How buyers and sellers are feeling

Agent sentiment, while improving, remains mixed. Satisfaction with market conditions dipped slightly from 62% to 61% in the last quarter, though confidence remains highest in the R2.6–R3.6 million price range. This aligns with the observed increase in activity levels within this bracket. In contrast, confidence in the more affordable segments (under R1.6 million) has weakened, likely due to ongoing affordability concerns.

Geographically, Gauteng has seen a boost in satisfaction, rising to 74% from 68%, while KwaZulu-Natal also made gains, climbing to 47% from 38%. On the other hand, the Western Cape and Eastern Cape have struggled, with sentiment dropping in both regions—particularly in the Eastern Cape, where satisfaction nosedived from 62% to 36%. This regional divide highlights the varying economic conditions influencing housing markets across the country.

Homes are selling faster, but financial pressure remains

Another key insight from the survey is that homes are selling slightly faster than before. The average selling time has dropped to 11 weeks, with the R2.6–R3.6 million segment seeing the biggest improvement. Homes in this price bracket are now selling about two weeks faster, indicating growing demand in the higher-end market.

That said, financial pressure remains a major reason why people are selling their homes. A staggering 26% of property sales were due to financial strain, up from 23% in the previous quarter. While this number is still higher than the long-term average of 18%, it’s encouraging to see that most financially pressured sellers are choosing to downsize rather than rent. This suggests that homeownership remains a priority, even when budgets are tight.

Interestingly, emigration-related sales have declined to 5%, falling below the long-term average of 9%. This suggests that fewer homeowners are selling up to move abroad. Meanwhile, sales driven by upgrading activity have risen to 12% from 10%, an early indication that confidence in the housing market is slowly returning.

What this means moving forward

So, where does all of this leave the housing market? While challenges remain—particularly in the affordable segment—there are definite signs of improvement. Shorter selling times, growing activity in middle-to-high-price brackets, and a general easing of financial pressures all point to a slow but steady recovery.

The big question is whether buyer confidence will continue to grow. With inflation easing and borrowing costs becoming more manageable, the conditions are set for a more robust market in the years ahead. If these trends hold, the housing market could be in for a much stronger performance in 2025 and beyond.

For now, it's a waiting game, but if you’re considering buying or selling, it’s worth keeping an eye on these evolving trends. The slow grind upward may not be exciting, but steady progress is better than no progress at all.