Predictions and Tips for the Residential Real Estate Market
Category Finance
With an upcoming election in May, it seems that 2024 will bring more uncertainty and commotion to South Africa. In light of this, many individuals may naturally opt to wait and observe before making significant decisions, like selling or buying property. However, this cautious stance could potentially be a misstep.
Inflation is on a downward trend, and there are indications that interest rates will soon decrease. Currently, inflation falls within the Reserve Bank's targeted range of 3% to 6%, with the Reserve Bank Governor forecasting an average of 5% for 2024. Consequently, there is widespread anticipation of a reduction in interest rates by between 0.5% and 1% throughout the year. Even this modest decrease is expected to bring about positive effects on bond repayments, particularly benefiting financially strained homeowners and prospective buyers.
To illustrate, a 1% decrease in interest rates could result in a cumulative effect, reducing the monthly repayment on a one-million-rand home loan by R1,000. Furthermore, the ongoing decrease in food inflation is expected to contribute to increased disposable income, further bolstering economic conditions.
Banks continue to extend loans despite the sluggish economy and modest property price growth. The competitive landscape has led banks to offer interest rates below prime for many buyers, while maintaining steady approval rates and deposit requirements for home loans. This is particularly advantageous for first-time buyers, signaling positive news in the housing market.
There is notable activity within the mid-market price range, attracting first-time buyers to the market.
Avoid attempting to predict market timing. Currently, it's a buyer's market, implying that sellers need to price their properties appropriately.
Property investment is rebounding. Elevated interest rates have dissuaded numerous buyers, bolstering the rental market in the process. While interest rates might decrease throughout 2024, rental demand is expected to remain robust, with rental escalations surpassing the rise in property prices.
In summary, the projected decrease in inflation and the possibility of lower interest rates in 2024 are likely to benefit the residential property market overall. While South Africa's market remains uncertain, those willing to adopt a long-term perspective can find opportunities amidst the fluctuations.
Author: Huizemark Sandton