SA house price growth remains sluggish, but lower interest rates will offer support — FNB

The FNB House Price Index (HPI) showed growth of a paltry 0.6% year-on-year in August, a level it has remained at since May. That is the slowest year-on-year growth since the 0.5% recorded in September 2009 during the throes of the Global Financial Crisis and the Great Recession. 

In short, South Africa’s housing market should be a buyer’s market but it seems few are buying.

In January this year, the HPI read was growth of 1.1% and it slowed from there to May, and since then it has remained at the same snail’s pace. FNB said that in the year to date, the average over the first eight months of 2024 has been annual growth of 0.8%, down from 1.8% in 2023 and 4.7% in 2022 over the same period. 

At least the slowdown in house price growth has been arrested and the prospect of lower interest rates and easing inflation hold the promise that the bottom has been reached. 

“Notably, the slowing trend appears to have stabilised since May and is expected to show a clearer upward trend once interest rates begin to decline,” FNB said. 

The South African Reserve Bank (Sarb) is widely expected to begin trimming when its Monetary Policy Committee wraps up its next meeting on Thursday, 19 September. Consumer inflation in July slowed to 4.6% from 5.1% in June, bringing it within the middle of Sarb’s mandated 3% to 6% target range. 

Sarb’s key lending or repo rate is currently 8.25% and the prime lending rate stands at 11.75%. 

“We have revised our inflation outlook downward, primarily due to a quicker strengthening in the rand exchange rate as domestic political uncertainty has eased and global sentiment improves. This adjustment has led us to anticipate an earlier interest rate cutting cycle. We now forecast two 25 basis points (in) repo rate cuts this year and another 25 basis-point cut early next year,” FNB said. 

“These adjustments suggest a slightly more optimistic outlook for buying activity and house price growth in the coming years. Improved economic activity, a more benign inflation environment, and looser monetary policy could improve affordability for potential homebuyers, stimulate demand and support house price growth.” 

Another factor that could provide the foundation for a rebound in the housing market is a shrinkage of supply. 

“Year-to-date (January to June), the supply of new stock decreased by 19.2% compared to the same period last year (Figure 4). This downturn is particularly pronounced in the <80 square metre category, which primarily represents affordable housing,” FNB said. 



“Furthermore, the pipeline supply is also shrinking, as evidenced by a 19.6% year-to-date decline in the volume of approved building plans, following a 30.1% decline in the same period last year. These developments reflect the weak demand environment and indicate that building activity will likely remain low until a significant increase in overall housing demand and selling prices is observed.”

FNB sees annual house price growth as reflected in its HPI picking up pace to an average of 2.6% in 2025 and 3.6% in 2026. This would still be a relatively subdued rate of growth at a pace that is likely to remain below inflation. But at least a corner will have been turned in the market. DM