Market overview - Q1 2024 property market

The hope for an interest rate cut after the close of Q1 has quickly been put to pastures. Homeowners and consumers countrywide will likely have to wait a bit longer before we expect to see an easing in the repo rate

That being said, experts are now readjusting their forecasts and predicting what could be a cut towards the end of the year. Are they grasping at straws? With a bit of insight from Lightstone analytics, we take a look at key property sectors, their implications for a proposed cut, and tips and strategies for homeowners trying to break even with their repayments.

Interest rate predictions adjusted to year-end

Central banks worldwide, including the South African Reserve Bank (SARB), are expected to continue a cautious approach. Recent data indicates that inflation, while moderating, remains above target levels, prompting the SARB to maintain a hawkish stance. 

Analysts now predict that the repo rate may remain elevated or modest hikes will be seen to ensure inflation is kept in check. This scenario suggests that the interest rates will likely be higher than initially anticipated, reflecting a global trend towards tighter monetary policy to combat inflation.

Existing homeowners with variable-rate mortgages may face higher monthly repayments, further straining household budgets. Overall, the end-of-year interest rate predictions suggest a cautious financial landscape that consumers and investors must know about.

Implications for homeowners and the real estate market

Interest rate predictions are significant for homeowners and the real estate market because homeowners with variable-rate mortgages face increased financial strain due to higher monthly repayments. If households cannot adjust their budgets, this situation may lead to an uptick in mortgage delinquencies and foreclosures. The higher cost of borrowing could also deter potential buyers, decreasing value.

Higher interest rates can dampen real estate activity. Fewer buyers in the market may result in longer times for listed properties and force homeowners to lower selling prices. However, the luxury segment of the market might remain relatively unaffected, as high-net-worth individuals are less sensitive to interest rate changes. Overall, the real estate market may face a period of adjustment as it adapts to the new financial landscape.

Strategies for homeowners struggling with repayments

Homeowners can adopt several strategies to manage their financial obligations. One practical approach is negotiating with lenders for loan modifications or refinancing options. Refinancing to a fixed-rate mortgage can provide predictable payments, shielding borrowers from further rate hikes. Extending the loan term can also reduce monthly payments, although it will likely increase the total interest paid over the loan's life.

Homeowners should also review and adjust their household budgets to cut unnecessary expenses and redirect funds towards mortgage payments. Additional income sources, such as renting out a portion of their home, can also help bridge financial gaps. Seeking advice from financial advisors or credit counselling services can also provide tailored strategies and support.

Q1 2024 property market overview

Despite higher interest rates, the first quarter of 2024 saw a surprisingly buoyant property market. Lightstone data shows approximately 47,276 transactions were recorded, with a combined value of just over R65 billion. The average transaction price was R1,377,014, with the bulk of activity below the R1.5 million price range. High-value properties also performed well, with significant activity in the R20 million-plus segment, particularly in areas like Cape Town's Atlantic Seaboard and City Bowl suburbs.

High-value property sales remain resilient

Despite broader economic challenges, the demand for high-value properties remains strong, maintaining stable prices and quick turnover rates. This resilience is driven by the unique attributes of luxury properties, such as prime locations, exclusive amenities, and architectural significance.

While most of these sales occur on the Atlantic Seaboard, data also indicates that luxury properties in the coastal towns of Ballito and Umhlanga and Gauteng's Northern Suburbs are experiencing a quicker turnaround.

Post elections predictions

The post-election period had many South Africans worried about the potential outcome of coalition talks. However, despite some of the most stormy predictions, the GNU, or Government of National Unity, was forged, and an alliance between the ANC, DA, IFP, and other smaller parties was formed. After the election of an ANC Speaker, Angela Thoko Didiza, and a DA Deputy Speaker, Annelie Lotriet, to the National Assembly, the rand to dollar ticked up and has continued to increase since the alliance was formed.  

The market generally receives policies that support housing affordability and infrastructure development. A pro-business government will continue to assuage concerns, which will likely lead to a more stable economic projection. There is every reason for foreign and local investors to seek opportunities in a growing South Africa where the government supports the free market.

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