SA house price growth slows in May while properties remain on market longer — FNB
House price growth in South Africa slowed on an annual basis to 1.9% in May from 2.1% in April, according to FNB’s latest monthly Property Barometer. This was its lowest level since June of 2020, when the economy was buckling under the weight of Covid-triggered lockdowns.
Now is not a great time to be an estate agent in South Africa. The number of Sundays spent putting up “Open House” signs for the same home is growing, while growth in the prices fetched is slowing.
“The FNB House Price Index’s annual growth decreased in May, averaging 1.9% year-on-year, down from 2.1% in April,” FNB said in its latest monthly Property Barometer published on Wednesday. And the April figure was revised down from 2.7% previously, so further number crunching could yet yield a lower number for May.
This was the slowest growth since the 1.7% annual average recorded in June 2020, during the early throes of the Covid-19 pandemic — a stark indicator of how depressed the housing market has become.
Inflation in May was running at 6.3%, so among other things, this highlights asset depreciation. For many middle-class and more affluent South Africans, a house is a key asset and at the moment, home ownership is generally not creating wealth.
The unfolding cost-of-living crisis and strained household budgets against the backdrop of rising interest rates and still elevated if slowing rates of inflation are the main factors at play here. Consumer confidence on the property front is simply eroding in a barely growing economy where the power supply in any new home one might aspire to buy is only reliable if it comes with rooftop solar panels and a diesel generator.
Lower-income groups are especially feeling the pinch, so it is perhaps counterintuitive that house price growth at the lower end of the market is faster than that at the upper end. This may reflect a scaling down among the middle class.
“Price growth remains well supported in the lower end, while early data shows significant declines in property values above R5.5 million,” FNB said. Indeed, house prices in that bracket fell by 20% or more in the year to May. By contrast, if your home was worth R300,000 or less, prices grew by close to 10%.
And, the amount of time that properties remain on the market has stretched.
“The results suggest that the average time that properties are on the market for sale has lengthened to 12 weeks and one day (85 days), compared to 75 days in Q1 2023… this is the longest time on the market since Q2 2020, and is attributed to slowing activity and stretched affordability,” FNB said.
Small wonder that estate agent sentiment has declined to 38% from 45% in Q1 of this year. If you have to spend 12 or more Sundays showing the same damn house, you are bound to be glum about current market conditions.
The reasons for selling are also revealing. Downscaling in the face of financial pressure is the No 1 reason, representing 24.1% of all sales, compared to 17% of sales volumes in the first three months of this year. That inducement is highest in the more affordable property segment, cited by 41.1% of those in the R250,000 to R300,000 price bracket.
Emigrating as a reason to sell has fallen to 9.0%, down from the peak of 18% in 2019. This may be a reflection of the fact that a big spanner was thrown into the works of many emigration plans by the onset of the pandemic. International travel and moving were arduous undertakings until around the middle of 2022, so it may pick up steam again.
Still, it remains a key reason among some price brackets. For homes fetching between R2.6-million and R3.6-million, it accounted for 19% of sales, second only to “downscaling with life stage”. So it seems a lot of older South Africans have homes in that price range.
The regional picture is also of interest. Overall market activity fell to a rating of 5.1 out of 10 compared to 5.7 in the previous quarter.
“By region, the Western Cape recorded higher activity at 6.2, still lower than last quarter’s 6.9 rating. Gauteng saw the biggest decline in activity, from 5.3 to 4.5, the lowest rating across all the regions,” FNB said.
The Western Cape remains the hottest property market in the country and Gauteng the chilliest. For estate agents in Gauteng, winter has come.
“House price growth should slow to around 2% this year from 3.5% in 2022, with risks skewed to the downside,” FNB said.
Expect estate agents, especially in Gauteng, to spend a lot more Sundays showing the same house. DM