The residential sector is likely to see record level growth in house price increases, as the property industry is expected to start recovering this year.
According to industry experts, the sector is starting the year off on a good note, with conditions conducive to a residential property market boom.
Bradd Bendall, national head of sales at BetterBond, said interest rate cuts at the end of 2024 bolstered the market, with the effects of the lower rates expected to be felt in the coming months.
“We expect house prices to lift to new record levels now that the prime lending rate has started to drop again after months of holding steady at a 14-year high. House inflation will be particularly pronounced in the metropolitan areas.”
BetterBond’s November property brief showed a 30% jump in home loan applications compared to the same period in 2023.
The inland market could benefit, with sales increasing in provinces including Gauteng, Mpumalanga and Limpopo
“The quarter-on-quarter results are also impressive, with home loan application volumes increasing by 18%. Though house prices took a slight knock in July and August, compared to the second quarter of 2024, the year-on-year movement suggests that a property market boom is imminent.”
Samuel Seeff, chair of the Seeff Property Group, said with improved economic sentiment, the continued absence of load-shedding, and a falling inflation rate, higher property prices and value increases are likely.
The inland market could benefit, with sales increasing in provinces including Gauteng, Mpumalanga and Limpopo as well as coastal areas such as Gqeberha.
“These markets have mostly been subdued with benign to no growth scenarios for many months and years in some instances and could start turning this year. Most of these areas sit with surplus stock. The increased buyer activity will drive higher sales volumes, and once stock levels start depleting, prices and property values could start rising more meaningfully again,” he said.
The property market was among the hardest hit by two consecutive years of interest rate hikes by the South African Reserve Bank between November 2021 and July 2023. This led to a decline in property sales and more demand for rental properties. After keeping the repo rate unchanged twice, the committee began its cutting cycle in September last year.
Bendall said property prices in the Western Cape are expected to soar due to ongoing demand from buyers semi-grating from other provinces.
“Here, we could see price increases significantly outstrip inflation with growth rates upwards of 10% to 20%, depending on the area.”
Meanwhile, JSE listed property companies are expected to experience continued growth after they started seeing a recovery in the second half of 2024. Independent property analyst Keillen Ndlovu said most real estate investment trusts (Reits) and property companies that reported lower earnings in 2024, have forecast positive earnings growth for 2025.
“We are likely to see an improvement across all the sectors. The industrial sector is a perennial outperformer and is still predicted to do well. Lower interest rates will help boost consumer spending and the retail sector. Township and rural retail are likely to continue trading better,” he said.
Ndlovu added that the office market was likely to see improvement but rental growth would not happen until there was a meaningful decline in vacancies. National office vacancies increased to 13.7% in the fourth quarter of 2024, a 10% increase from the third quarter.
In the industrial sector, demand is expected to shift towards “strategically located properties” in Gauteng and the Western Cape and continue to drive demand for warehousing and distribution centre facilities throughout 2025.
According to Improvon, a specialist property investment company focusing on the warehousing and logistics sector, attractive properties are those offering proximity to airports, major highways and key roads, as well as access to a skilled workforce, robust infrastructure and secure environments.
“With a growing focus on cost-efficiency, tenants are increasingly opting to lease spaces in new developments, where operational efficiencies help reduce occupancy costs,” said Mark Truscott, head of leasing at Improvon.
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