The outlook for house prices is slightly dimmer, FNB said in its Residential Property Barometer, released on Friday.
Growth in the FNB House Price Index averaged 0.8% in the first quarter of 2024, unchanged from the fourth quarter of 2023.
High borrowing costs and uncertainty were discouraging potential buyers, while unfavourable selling conditions were causing some homeowners to hold back on listing their properties.
FNB said it echoed its view of a hesitant house price growth trajectory in the near term.
“The elevated living and borrowing costs, as well as heightened political uncertainty – both domestically and internationally – are weighing on transaction activity and, ultimately, property prices.
“Nevertheless, wide disparities are evident across regions. Generally, larger non-metro regions are seeing stronger house price growth relative to traditional metropolitan cities. Demand in these regions gained support from the semigration trend,” it said.
Looking at US rate cuts, it noted: “Our recent analysis indicates the US economy is performing stronger than anticipated, with inflation remaining more persistent. This leads us to believe that the US Federal Reserve will keep interest rates higher for a longer period, with the first reduction potentially delayed from June to September this year.”
In South Africa, the SA Reserve Bank had signalled a potential shift towards a stricter inflation target of 3%, compared to the current 4.5% target. However, the exact timing of this change remained unclear
Thus, FNB said, it expected delayed recovery in the housing market, with a slightly lower overall growth trajectory compared to its previous forecast.
Property prices continued to slide across most emerging economies, largely due to weaker labour markets and stretched consumer affordability.
It said credit market data showed tighter lending standards; the loan-to-price ratio had ticked up to 95.6% in 1Q24, from 94.3% previously.
“This increase reflects lenders loosening down payment requirements for higher-priced properties, while tightening them for lower-priced ones. This could be a sign of lenders becoming more cautious in the face of rising credit defaults,” it said.
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