SA house prices are going nowhere

The FNB House Price Index (based on FNB mortgage activity) showed year-on-year growth of just 0.6% in January. File photo.

The FNB House Price Index (based on FNB mortgage activity) showed year-on-year growth of just 0.6% in January. File photo.

Published Mar 8, 2024


Residential property prices in South Africa remain in the doldrums, with only the lowest-priced sector of the housing market showing above-inflation increases year-on-year.

This is according to the FNB Residential Property Barometer and the Lightstone Residential Property Index to the end of January.

The FNB House Price Index (based on FNB mortgage activity) showed year-on-year growth of just 0.6% in January. Inflation was 5.3%, which means that, in real terms, the average house value fell by 4.7% in the 12-month period.

Growth to the end of 2023, also 0.6%, was the lowest recorded by the index since the global financial crisis (GFC) in 2008, when it was negative 5.1%.

Since the GFC, the index has mostly remained below the Consumer Price Index (CPI) inflation rate, with only 2013 showing decent above-inflation growth at 7.7% (CPI was 5.4% in December 2013).

The Lightstone Index, which gets its data from the Deeds Office, reported a higher year-on-year growth figure of 2.41%, but this is still well below inflation.

Looking at house prices per province, Lightstone’s most recent data (October 2023) show highest growth in the Western Cape (4.8%), Mpumalanga (4.8%) and Limpopo (4.3%), while the lowest growth was recorded in Gauteng (0.4%).

There is a marked difference in growth between coastal and non-coastal properties (6.4% versus 1.9%) and a difference between freehold and sectional title properties (2.7% versus 1.0%).

On both indices, only the lowest-priced entry-level properties have shown decent price growth. Lightstone says growth on properties valued at under R250 000 was 7.3%; FNB reports growth on properties under R300 000 at about 13% and those valued between R300 000 and R500 000 at about 7%.

Growth in mid-priced properties (up to R1.5 million) was around 2% on both indices.

On properties of over R1.5m, Lightstone reported average growth of 3.2%. The FNB Index growth figure for properties of between R1.5m and R2.5m was 3.5%, but high-end properties of between R7.5m and R10m showed negative growth of 3.5%.

Commenting on the state of the affluent market, FNB Senior Economist Siphamandla Mkhwanazi said: “After a productive 2021 and 2022, marked by favourable pricing, a robust recovery in non-labour income, improved balance sheets in the aftermath of the pandemic, and the rise of remote work, buying activity declined sharply in 2023, weighing on property values.

The semi-gration trend is also normalising, providing less support to high-end property demand in coastal towns. On the positive side, sales related to emigration have slowed, and anecdotal evidence suggests an increase, albeit from very low levels, in South African expats buying local property in higher-priced segments. Ultimately, sentiment will be an important determinant of market outcomes, and subject to event risks such as the National Election outcome.”

Paul-Roux de Kock, chief analytics officer at data and analytics firm Lightstone noted that residential markets around the world were struggling as geo-political conflicts and tough economic times took their toll on consumer spending. This was compounded in South Africa by the uncertainty an election year typically brings.

“Unfortunately, the dampening domestic environmental factors – load shedding and water outages coupled with difficult socio-economic conditions – show little sign of short-term improvement and are unlikely to help the residential property market,” De Kock said.

Mkhwanazi said that although affordability pressures should ease somewhat, house price growth was unlikely this year. “The subdued house price growth trajectory is likely to persist for a while, until the lagged impact of lower inflation and borrowing costs filters through, from late 2024 to early 2025. In the longer term, price growth will be supported by improved GDP growth, and a combination of stronger demand for housing and improved structural affordability,” he said.