House Price Inflation Report: From 1.8% to 3.5% - Surpassing Predictions of 2023, Yet Holding Steady

House price inflation (HPI) in South Africa’s residential property market in2024 should average out at between a low of 1.8% and a high of 3.5%.

Residential markets around the world are struggling as geo-political conflicts and tough economic times take their toll on consumer spending – compounded in SouthAfrica by the uncertainty an election year typically brings.

HayleyIvins-Downes, Head of Digital at Lightstone, provider of comprehensive data, analytics and systems on property, automotive and business assets, said“Lightstone’s three scenarios suggested HPI in South Africa would likely come in between 1.84% (low) to 2.86% (mid) or 3.57% (high)”. 

 “The low scenario assumes GDP of 0% and core inflation of 5%, the mid scenario is based on GDP of 1% and core inflation of 4.5%, while the high scenario assumes GDP of 1.2% and core inflation of 3.5%”, Ivins-Downes said. Lightstone has assumed a repo rate increase of 2 basis points for the low scenario, an increase of 1 basis point for the medium scenario and an increase of just 0.25%for the high scenario.

The scenarios are consistent with those forecast for 2023. HPI in 2023 finished at 2.39%, against a forecast range from 0.9% to 3.7%. Unfortunately, the dampening domestic environmental factors – loadshedding and water outages coupled difficult socio-economic conditions – show little sign of improvement and are unlikely to help the residential property market.

Commentators were, however, relieved that property taxes remained unchanged in the recently announced 2024 budget, although concerns were expressed around transfer duty exemptions and the end of the solar rebate for residential properties. Industry spokespeople expressed regret that the transfer duty exemption threshold was not increased from R1.1 million to boost activity, as Lightstone data shows that most first-time buyers look to buy in the R700 000 to R1.5 million price bands.

Ivins-Downes said, “Lightstone expects luxury homes (see next three graphs) to fare best in terms of HPI, with a high scenario of 4.09%(up on the achieved HPI of 3.05% at the end of 2023), compared to 3.2% (1.78%at end December 2023) of high value homes and 3.45% (2.48% at end December) formid value homes”. 

“The mid scenarios are more or less in line with HPI in 2023, and the likely outcome for 2024, and would represent an improvement in each of the price bands over 2023,” she said