18 December 2023
As 2023 hurtles to a close, all eyes are turning to what’s in store for 2024. The Rawson Property Group’s Sales, Rentals, Commercial and Finance specialists share their analyses of this year’s key trends and events and explore the most likely shifts to occur in 2024.
Residential Property Sales
“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,” says David Jacobs, Gauteng Regional Sales Manager for the Rawson Property Group. 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,” Jacobs says. “It was very clear that a lot of buyers who had bought at their full domestic purse capacity - when interest rates were lower - were finding their financial obligations unsustainable in current conditions.” Trends amongst those buyers still active on the market also shifted from upscaling to downscaling, as lifestyle affordability took centre stage.
Jacobs says that this cost-consciousness is unlikely to change dramatically in 2024, and buyers will remain extremely price sensitive. However, 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. And, as is the case currently, sellers with properties priced correctly in the relevant market conditions will continue to conclude successful transactions in completely reasonable timeframes.
“I think there are a lot of buyers who have put off their property purchases while they wait to see what direction the market and economy is headed in,” says Tony Clarke, Managing Director of the Rawson Property Group. “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.”
Property finance kicked off the 2023 year with skyrocketing interest rates and declining consumer affordability. According to Leonard Kondowe, National Manager for the brand’s in-house bond origination division Rawson Finance, these conditions were largely driven by global circumstances beyond our control.
“Despite the difficult market, lenders were most definitely still willing to finance property purchases,” he says. “In fact, we saw an increase in competition between lenders to secure qualified buyers, resulting in a lot of very favourable deals being done. That said, affordability has been under serious pressure, and the total number of bond applications has gone down.”
With interest rates finally on pause, and inflation taking a breather, Kondowe says signs are positive for 2024. “The most critical influences will be whether or not the ongoing Middle East crisis can be contained, and of course the handling of our own elections here at home,” he says. “Ideally, we want to see stability and recovery in our economy, which would have a knock-on effect on consumer affordability and investor sentiment.”
Residential Property Rentals
The rental market definitely had a slightly easier time in 2023, with tenant payment behaviour showing notable improvement over the course of the year. According to Jacqui Savage, National Rentals Manager for the Rawson Property Group, it’s an extremely positive sign that tenants are successfully handling the increased pressure on their household budgets. According to credit bureau TPN’s most recent survey, Rental escalations also improved in 2023, albeit modestly, climbing from 4.8% in Q2 to 4.84% in Q3.
“Higher rentals have been moderated by slow capital growth, though, thanks to subdued house price inflation,” says Savage. “Despite this, national average rental yields remain above inflation and increasing, with sectional title property enjoying stronger performance than freehold at present.”
As interest rates and inflation start to stabilise, Savage says pressure on tenants should begin to ease.“Our Rawson rentals agents are already seeing more willingness among tenants to negotiate rental escalations, which should contribute to healthier growth in 2024,” she says. “That said, market-related pricing is still going to be essential. I’d highly recommend landlords work with an experienced rental agent to list their properties according to a professional rental valuation, and avoid overshooting the mark on rental escalations.”
“2023 has been a tough year for commercial property, there’s no skirting around it,” says Craig Mott, Head of Business Growth for the Rawson Property Group. “Between poor economic growth, loadshedding, elevated interest rates, rising operating costs, poor municipal service delivery and a global economic slump, it’s just a really tough time to be a business in South Africa.” Of the three main commercial property sectors (office, retail and industrial) Mott says the office market has struggled the most. “There is still a significant oversupply creating high vacancy rates,” he says.
“These have begun to show early signs of recovery as more workers return to office – possibly driven by load shedding – but there’s definitely still a long way to go.” Mott says the office vacancy rate recovery has been most pronounced in Cape Town – a trend he expects to see continue into next year. However, he believes similar trends could start emerging in South Africa’s other major metros if the interest rate and inflation rates manage to remain stable.
“Retail has also been adversely affected by economic conditions, with weakened sales performance driving high mall vacancy rates,” says Mott. “Industrial, on the other hand, has enjoyed relatively low vacancy rates, resulting in stronger growth in the sector, making it the best-performing commercial property type in 2023.” As for what to expect in the year to come, Mott says recent increases in high value commercial and industrial sales are extremely promising.
“2024 looks set to be a better year to acquire assets,” he says. “Sustained pressure on interest rates and inflation could see more properties coming to market, making it a great time for investors to expand their portfolios.”