2024 House Price Inflation: Lightstone Forecast between 1.8% and 3.5%

House Price Inflation (HPI) in South Africa's residential property market in 2024 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 South Africa by the uncertainty an election year typically brings.

Paul-Roux De Kock, Chief Analytics Officer 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, being a best-case scenario, assumes GDP of 1.2% and core inflation of 3.5%. Lightstone has assumed a repo rate increase of two basis points for the low scenario, an increase of one 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 with difficult socio-economic conditions - show little sign of short-term 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.

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) for mid 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.

Market Review - January 2024

National year-on-year house price inflation at the end of January 2024 stood at 2.41% which equated to 0,23% per month. This is showing a slight decrease from the December 2023.

On a provincial level, annual property inflation has remained steady in the Eastern Cape, Gauteng, and Mpumalanga. However, it has increased in the Northern Cape, while decreasing in the Free State, KwaZulu-Natal, Limpopo, North West, and Western Cape compared to the third quarter of 2023.

Annual property inflation for properties in the Low Value segment has stabilised at 7.3%, mirroring the unchanged rate of 1.8% for High Value properties compared to the previous month. Mid Value properties have experienced a marginal decrease to 2.4% from December 2023, while inflation for properties in Luxury segment is higher at 3.2%.