Landsdowne Property Group, one of South Africa's largest residential real estate managers and estate agencies, says the South African Reserve Bank’s hawkish stance on interest rates, rising living costs and the upcoming VAT hike could put the brakes on positive momentum in the residential property market.
Jonathan Kohler, Founder and CEO of Landsdowne commented:
“In an environment of rising living costs, affordability remains a major factor. The MPC’s decision to hold interest rates and concerns over economic growth will likely impact investor sentiment in the short term, as buyers adopt a wait-and-see approach."
Kohler added that potential buyers in certain market segments may opt to continue to rent, due to the added certainty provided by a fixed-cost lease.
Upcoming changes to transfer duties could, however, stimulate buying activity in the more affordable segments of the property market. While transfer duties have risen by about 10%, those purchasing properties valued up to R1.210 million will be exempt from paying transfer duty, starting from 1 April 2025. This marks an increase from the previous threshold of R1.1 million.
“This adjustment marks a significant and welcome shift for the property market, especially in the secondary sector. By boosting affordability in the lower- to middle-income brackets, we foresee heightened interest from first-time buyers and upward momentum across various property segments. This move has the potential to drive market activity and benefit both buyers and sellers.
“Additionally, while the higher-end property market faces increased transfer duties, the impact is expected to be minimal, as buyers in this segment typically have greater financial flexibility and are unlikely to be deterred by the adjustment,” added Kohler.
Despite concerns over economic growth, investor confidence remains buoyant, with the Absa Homeowner Sentiment Index for the fourth quarter of 2024 showing that 85% of investors are optimistic about expanding their portfolios - the highest level of investor confidence since 2016.
“Expectations of stable or lower inflation and further interest rate cuts in May and possibly later this year are expected to continue to drive property investment, but at a slower pace. Savvy investors will want to lock in value now. Gauteng in particular offers exceptional value for money, as house prices have remained stagnant for almost a decade,” he said.
