Spokesperson and FNB Senior Economist, Siphamandla Mkhwanazi, sums up the FNB Residential Property Barometer for 1Q24 and May 2024.
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Mkhwanazi highlights that affordability remains a challenge, with overall uncertainty dampening housing market activity.
Forecast changes
FNB’s recent analysis indicates the US economy is performing stronger than anticipated, with inflation remaining more persistent. This leads us to believe that the US Federal Reserve will keep interest rates higher for a longer period, with the first reduction potentially delayed from June to September this year.
In South Africa, the reserve bank has signalled a potential shift towards a stricter inflation target of 3%, compared to the current 4.5% target. However, the exact timing of this change remains unclear.
This potentially means keeping interest rates higher for a longer period to achieve this new target and control inflation. As a result, we have adjusted our forecast for the repo rate, predicting a slower and delayed decrease with some potential downside risk in the medium to long term.
Impact on housing market
These adjustments lead us to expect a delayed recovery in the housing market, with a slightly lower overall growth trajectory compared to our previous forecast.
Current market conditions
Siphamandla Mkhwanazi
The FNB House Price Index growth averaged 0.6% y/y in April, slightly lower than the 0.7% in March. Market strength indicators, derived from the property values database, suggests both buyer demand and seller supply are shrinking. High borrowing costs and uncertainty are discouraging potential buyers, while unfavourable selling conditions are disincentivising some homeowners from listing their properties.
Mkhwanazi says: “Our quarterly report shows that there are regional variations, with larger non-metro regions (districts) experiencing stronger house price growth than metropolitan cities. Globally, property prices are down in most emerging economies but show signs of recovery in some Latin American countries.”
“In contrast, tighter labour markets and limited housing supply in advanced economies continue to push property prices up. Credit market data shows tighter lending standards: loan-to-price ratio has ticked up to 95.6% in 1Q24, from 94.3% previously. This increase reflects lenders loosening down payment requirements for higher-priced properties while tightening them for lower-priced ones. This could be a sign of lenders becoming more cautious in the face of rising credit defaults.”
Read the FNB Property barometer – 1Q24 (2) here.
Read the FNB Property barometer – April 2024 (1) here.
Listen to Siphamandla Mkhwanazi’s voice note here.
