House price growth plateaued in November, while by region Cape Town was the best-performing metro and Johannesburg was at the bottom of the pack, according to the FNB Residential Property Barometer released yesterday.
The FNB House Price Index growth averaged 0.5% year on year in November, virtually unchanged from the previous month’s print.
Siphamandla Mkhwanazi, FNB senior economist, said: “Our market strength indices show both demand and supply in negative territory.”
He said while it was expected that interest rates had reached their peak, with a measured cutting cycle coming into view in the latter half of next year, in line with diminished affordability, buying activity continued to decline across the spectrum, with volumes languishing slightly below pre-pandemic levels.
Mkhwanazi said there were signs of widespread downscaling in the market, supporting volumes in lower-priced brackets.
“At the same time, younger buyers have become more despondent, reflecting the disproportionate impact of subdued economic activity and high interest rates on younger individuals,” Mkhwanazi said.
He added FNB projections of slightly lower interest rates and moderately better growth outcomes should help stabilise mortgage volumes and property price growth next year.
By price, preliminary data showed that price growth was slowing across all their selected price brackets, except for the R1.25–R1.5 million, which likely reflected the buying down effect.
Looking at regions, affluent individuals were selling inland property, and buying in the coastal regions, particularly in the Western Cape.
Mkhwanazi said they expected the weak house price growth trajectory to continue for a little while until inflation and borrowing costs ease more meaningfully from the second half of 2024.
“Year-to-date (January to November), house price appreciation averaged 1.6%, consistent with our prediction of 1.5% on average for 2023. While price growth should bottom in 4Q23, recovery will likely be moderate as interest rates gradually decline, and demand in the interest-rate sensitive segments slowly returns.”
Feedback from estate agents continued to illustrate weakening buying activity, though short-term expectations were now showing signs of optimism.
In the year-to-date (January to September), new mortgage volumes had declined by 27% according to the latest available Deeds registrar data. The decline was more pronounced in higher-priced segments, with the more affordable segments of the market supported by the downscaling trend.
Volumes in the bottom 20% bucket, with an average purchase price of about R500 000, were 24.7% lower compared to the same period last year. In contrast, volumes in the top 20% (average R2.9m) were down 27.8%.
The FNB Property Barometer found that furthermore, younger buyers, including first-time buyers, had been more despondent. The share of mortgage volumes attributed to individuals aged below 35 had declined from the most recent peak of 47.3% in third quarter 2020 to 39.7% in third quarter 2023.
Mkhwanazi said this reflected the disproportionate impact of subdued economic activity and high interest rates on younger individuals, while stronger balance sheets often insulated older individuals.
“Overall, these trends align with our expectations and reflect higher debt-servicing costs, reduced affordability, and tighter lending standards.
“Our projections of slightly lower interest rates and moderately better growth outcomes should help stabilise mortgage volumes next year. We expect volumes to decline by around 30% this year, and partially recover by 5% in 2024,” he said.
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