South African homeowners are being forced to downscale amid the high interest rate environment.
The latest FNB House Price Index increased by 0.5% year-on-year in June – a slight improvement from 0.3% in May.
“The low house price growth trajectory aligns with expectations given the persistent high living and borrowing costs,” said FNB.
“Notably, lower-priced segments and non-metro regions continue to perform better. Market strength indicators suggest a potential stabilisation in supply and demand dynamics following a period of decline.”
The latest Estate Agents Survey shows a housing market weighed down by election worries and several affordability constraints.
Market activity ratings dropped to an average of 5.6 in 2Q24 – below the long-term average of 5.9.
Nevertheless, the latest reading is above the most recent lows, suggesting that a potential bottom-out occurred.
The slowdown aligns with agent expectations and highlights buyer hesitancy caused by the election uncertainty.
The survey also looks into the motivations behind property sales, with downscaling a common theme.
Downscaling due to life stages, which include moving into retirement homes, remains the most common reason in South Africa, totaling 22% of total sales.
Financial pressure-induced sales also rose slightly to 21% of total sales in Q2, aligning with the historical average and suggesting a common trend of sellers motivated by high debt-servicing costs.
Notably, the survey also shows a preference among these financially motivated sellers to downsize rather than rent, reinforcing the continued buying-down trend.
Relocation within South Africa (semigration) remained steady at 14% – still above the long-term average
Upgrading activity, on the other hand, slowed significantly to 11%, highlighting homeowners’ cautious approach in the current high-interest rate market.
Emigration-related sales also remained unchanged at 8%, shifting away from the peak seen in 2019.
Amid the downsizing trend, the affordable housing segment is offering a glimmer of hope.
The segment recorded a higher activity rating &.4) compared to the traditional market (5.0).
“Following the recent support from ultra-low interest rates, buying activity in this segment appears to be further supported by a search for less expensive properties, as elevated interest rates and stricter lending standards stretch affordability for many,” said FNB.
