Housing Market Recovery: Key Insights for Buyers and Sellers

Major metro markets are beginning to show clear signs of recovery, supported by a boost in buyer sentiment, anticipated interest rate cuts, a continued fall in fuel prices, and the ongoing absence of loadshedding. Serious buyers, who had previously adopted a wait-and-see approach leading up to the elections, are now committing to property transactions. This improved sentiment may be a key factor behind the revival the residential property market.

According to FNB’s Property Barometer for August 2024, the housing market has been constrained by affordability challenges and geopolitical uncertainty. Koketso Mano, senior economist at FNB, noted that persistently high global inflation, elevated living and borrowing costs, high interest rates, unemployment, political instability, and job insecurity have continued to suppress overall market sentiment.

As global inflation slows and price increases moderate, central banks are expected to signal the end of interest rate hikes. These factors will stabilise the decline in buying activity, support potential buyers and lead to a revitalised housing market.

What does this mean for sellers?

Buyer hesitancy has led to an increase in the time properties remain on the market. FNB reported a rise in the number of weeks properties are listed before selling, affecting all regions and price points. "Crisis sales" (sellers downgrading due to financial pressure), semi-gration, and emigration transactions account for nearly half of the common reasons for selling. These categories are often time sensitive, but sellers face a challenge in achieving their asking prices.

When there is a high volume of urgent sales, sellers may feel pressured to lower their prices to attract buyers quickly. However, urgency is not always in the seller’s favour. A saturated market filled with properties listed due to time constraints—such as crisis sales or forced relocations—creates a buyer’s market. In this environment, buyers know that many sellers are under pressure to sell quickly, and they may leverage this to negotiate lower prices. This imbalance between supply and demand puts downward pressure on property values, as buyers become more selective and offer less than the asking price, knowing they hold the advantage.

Additionally, when properties linger on the market for extended periods, it can signal to buyers that the property is overpriced, leading to further reductions in offers. Sellers who are too eager to offload their properties risk missing out on potential value if they don't have a sound pricing strategy in place.

It is crucial to enlist a qualified property practitioner. An experienced agent can assess the market landscape, help set a competitive price, and guide sellers through the complexities of navigating a buyer’s market. By understanding the current market phase and being realistic about pricing, sellers can avoid disappointment and the potential financial strain that comes with drawn-out sales processes or settling for a lower-than-expected price.

What does this mean for buyers?

Slower price increases and the potential for interest rate cuts are creating a more favourable environment for buyers, contributing to a recovery in the housing market. With inflation cooling and the cost of borrowing expected to decrease, buyers are finding themselves in a stronger position to enter the market. Mano highlights that lower fuel inflation will lead to slower transport inflation, which should ease the overall cost of goods and services, including essentials like food. This shift means consumers will have more disposable income, which can help drive renewed interest and activity in property purchases.

For buyers, this environment presents an opportunity to take advantage of attractive conditions while prices remain relatively stable and before competition intensifies as more buyers re-enter the market. However, it’s important for buyers to act strategically. While slower price increases and lower inflation are beneficial, the current market still favours those who do their research and negotiate wisely. With more sellers feeling pressured to sell quickly, buyers may have the upper hand, but they should also be mindful of future interest rate fluctuations and the long-term affordability of their investment.