Our Most Recent Property Market Downturn Feels Like The Worst Ever

The wonderful thing about a new year isthat it brings a sense of hope and optimism that things are on the up and thefuture looks a little brighter. For the property market the Reserve Bank'sMonetary Policy Committee, who meet every two months, decided to keep the keyrepo rate unchanged on 26th January 2024 which means that the commercial bankshave kept their prime lending rates unchanged at 11,75%.

Ifyou are burdened under the weight of high monthly interest payments hold on abit longer - the interest rate cycle should reverse at the March or May 2024scheduled meetings. As property practitioners, we understand the direct linkbetween the cost of money and the demand for property. We therefore keep oureyes fixed on the Producer Price Index (PPI) and the Consumer Price Index (CPI)as these measures of inflation in our economy dictate the movement of interestrates. The good news is that PPI measured 4% in December 2023 down from 4.6% inNovember and 5.8% in October.

Thistrend is important as PPI supports and drives CPI. Our CPI inflation wasmeasured at 5.1% in December down from 5.5% in November and 5.9% in October.With this trend continuing there is a high probability of the beginning ofinterest rate relief in March this year.

FNB'sdetailed Property Barometer report indicates a marginal recovery of houseprices in December showing growth of 0.8% in December up from the annual low of0.5% recorded in Oct 2023. To give you an idea of how bad 2023 was for Houseprice growth rates we must go back to 2008/2009 to find worse tradingconditions. As a reminder, at the time of the Global Financial Crisis, onlynegative growth rates were recorded for 15 consecutive months between May 2008and July 2009 with the highest negative growth rate being -5.8% in September2008. In the same way that winters always feel colder than anything experiencedbefore our most recent property market downturn feels like the worst ever butthe data suggests otherwise and the indicators are all pointing towards animprovement.

Themost common reasons for selling are recorded by FNB in their report andunsurprisingly the current top reason is "Downscaling due to financialpressure" at 24.7% of all sellers. The next biggest is "Downscaling withlifestage" at 21.4% which is often the most pervasive reason for a sale.Relocating, Upgrading and Changing Family Structure are all important reasonsfor a sale and are recorded as being 10.9%, 10.1% and 10.8% of sales respectively.Emigration remains stubbornly high at 8.2% and is as high as 12,5% for therecorded upper end of the market. Theaverage time for a property to be on the market is currently 81 days but thisis not the case for the upper end of the market. For homes over R10m, the timeon the market in our North Coast area is typically well more than 180 days andcan sometimes be measured in years.

Fornow, we have one of the most exciting buyer's markets in over a decade and anexcellent opportunity for those who have been thinking of investing to committo a property that offers compelling value.