Stable, lower interest rates will help property buyers in 2024

A stable interest rate will bring about a much-needed boost for the lagging property market and reduce the immense financial pressure on homebuyers. Picture: Mart Production/Pexels

A stable interest rate will bring about a much-needed boost for the lagging property market and reduce the immense financial pressure on homebuyers. Picture: Mart Production/Pexels

Published Dec 22, 2023


This year has been a difficult one for South Africans trying to make ends meet in the cost-of-living crisis, but for aspiring homeowners it has been even tougher – and, in many cases, disheartening.

Rising interest rates have forced many buyers to abandon their dreams of homeownership in 2023 and the outlook for 2024 is only a little better with interest rates expected to stabilise and perhaps come down towards the end of the year.

Still, it may still be a while before they drop to a level where more people can afford to take their first steps on the property ladder.

David Jacobs, Gauteng regional sales manager for the Rawson Property Group, says residential sales have been under a bit of pressure for some time now, largely due to the rapid interest rate rise and increasing cost of living. The effects of this pressure started becoming more noticeable from around March/April 2023.

“We started seeing a noticeable drop in buyer demand, an increase in the average time a property stays on the market, and an uptick in distressed property sales.”

While cost-consciousness is “unlikely to change dramatically” in 2024 and buyers will remain extremely price sensitive, he says stabilising interest rates and inflation could unlock a pent-up wave of buyer activity with positive results for property price growth in the mid- to long-term.

Many buyers have put off their property purchases while they wait to see what direction the market and economy is headed in, adds Rawson managing director Tony Clarke.

“If the interest rates and inflation remain stable – or better yet, decline – in 2024, I think we could see a flood of pent-up demand hitting the market from around the second quarter. This won’t have an immediate effect on property price growth, but it will most definitely relieve some of the pressure on sellers who may have had a rather stressful time of things.”

However, Dr Andrew Golding, chief executive of the Pam Golding Property group, says the prospect of US and South Africa’s elections next year could complicate the outlook for 2024, although the recent decision by S&P Global to affirm SA’s credit rating is a reassuring sign of stability.

Generally speaking, though, he says there is likely to be an improvement in a number of key residential property metrics when compared to 2023. Dominating this improvement in outlook will hopefully be the start of a downward trend in interest rates which nearly always signals an uptick in activity and, as a consequence, is also likely to herald the start of a cycle of real house price growth.

Furthermore, with the toll that load shedding took on the economy in 2023 hopefully expected to ease significantly during the next year, prospects for growth should improve.

Although interest rates are expected to stabilise in the coming months, Rhys Dyer, chief executive of ooba Home Loans, says urgent intervention is needed to restimulate home-buying activity in a contracting market environment.

In October 2023, the average purchase price of homes in South Africa (as measured by ooba Home Loans) increased by 2.6 percent on the previous year – with national house price inflation showing tentative signs of recovery.

“While low house price inflation allows for great investment opportunities, home buying activity is currently in a lull and the effects of a high-interest rate environment are being felt by the industry and consumers alike.”

In addition, the trend of reduced buying activity is not limited to home loans.

“TransUnion’s latest Consumer Credit Index shows a cut back in discretionary spending by households of 60 percent and reduced credit demand for vehicle loans.”

FNB’s latest Estate Agent Survey indicates that, despite the subdued house price inflation, 67 percent of listed properties across the country now take three months or more to sell – up from 56 percent Q2 ’23.

“An increase of more than 10 percent quarter-on-quarter is significant as supply continues to outpace demand,” Dyer says.

Still, he believes that “we are out of the woods for the most part” and that interest rates will remain at the current levels until around mid-2024.

“The majority of experts predict rate cuts in the second half of 2024, in line with the actions taken by the US Federal Reserve Bank and we believe that this will bring about a much-needed boost for the lagging property market and reduce the immense financial pressure on existing homebuyers.

“As observed during the record low rates during the Covid-19 pandemic and the resulting spike in home loan applications, rate fluctuations have the biggest impact on home buying demand, particularly among first-time homebuyers.”

Globally, Golding says Savills researchers from around the world are predicting a more positive real estate investment environment in 2024, with 57 percent on average expecting a moderate to strong increase in investment activity next year, although this rises to as high as 70 percent of respondents for multifamily residential property – a sector where demand outstrips supply in many areas.

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