Inflation, stagnant salary growth, and high interest rates have made homeownership unaffordable for many South Africans, resulting in rent escalations as demand grows—which is good news for landlords.

On 30 May, The South African Reserve Bank’s (SARB’s) Monetary Policy Committee voted to hold rates, keeping the repo rate at 8.25% and the prime lending rate at 11.75%.

The decision was unanimous. Since the start of the rate hike cycle in November 2021, rates have been hiked by 475bps to the highest levels in 15 years.

Several property experts have called the unanimous decision to hold interest rates as disappointing but expected.

However, what wasn’t expected was Reserve Bank Governor Lesetja Kganyago’s strong indication that the repo rate probably wouldn’t come down at all this year, pointing instead to the second quarter of 2025.

“The stance of the Reserve Bank has been too hawkish. While inflation has moderated, the reality is that keeping the interest rate so high for so long has done little to bring down inflation, largely as it is not demand-driven but rather ‘imported’ into the economy,” said chairman of the Seeff Property Group, Samuel Seeff.

Even Standard Bank recently signalled concern that the level of home loan distress is rising.

This means homeowners will remain under strain for at least the next six months, making it unaffordable for many prospective buyers.

Evidence of this was noted in the latest TPN Tenant Survey Report 2024, which showed that 58% of respondents stated that financial obstacles are the main reason they choose to rent, with 48.1% explaining that they cannot afford to buy a property.

This proves consumers are struggling to deal with high interest rates, inflation, and limited job prospects.

For 9.9% of respondents, a poor credit record is a barrier to purchasing a property.

Additionally, due to the high expenses associated with homeownership, 11.4% of renters believe it is cheaper to rent, while 2.2% do not want to take on the debt of owning a property.

Good news for landlords

While being tough for tenants and wannabe homebuyers, the current market is a good news story for landlords.

The unaffordability of houses has meant that the demand for rentals has increased substantially since 2021, similar to when the SARB’s MPC started the rate hike cycle.

According to the latest Rode’s Report on the South African property market, flat vacancy rates nationally in South Africa have continually dropped from over 10% in 2020 to 7.9% as of Q1 2024.

This, in turn, has resulted in escalating rentals for landlords, with PayProp’s Rental Index Annual Market Report—2024 Edition noting that the average rent in South Africa sits at R8,598—an increase of R368 year on year and R147 above the previous quarter (Q3).

This trend doesn’t seem to be going away anytime soon, as TPN’s survey shows the majority of tenants aren’t looking to own property in the near future.

The survey showed that only 29.2% of tenants are considering taking the property plunge within five years.

However, the report warned that landlords must be mindful of the prevailing economic conditions.

TPN suggests that the current constrained economy requires property investors and practitioners to carefully navigate stressed consumers by implementing reasonable escalations, ensuring good payment behaviour, and keeping their premises occupied.

Source: Business Tech

The post Joy for landlords in South Africa appeared first on Amora Escapes.

If there was a property market World Cup, no Australian city would have qualified for the 2023 event.

When it comes to property market performance globally, Australia’s state capitals are nowhere to be found among the top 32 cities in the world, the number of representatives that would typically play in a sporting world cup tournament.

Adelaide’s annual residential dwelling increase of 6.0 per cent ranked it 35th among the 150 cities assessed as part of the Knight Frank Global Residential Cities Index (2023 Q1) released this week.

Sydney, Melbourne and Hobart, meanwhile, would be staring at relegation to the lowest league on offer.

The lacklustre performance of Australian cities was mirrored by the overall performance of international property markets.

Average annual growth across the 150 cities included in the Knight Frank Global Residential Cities Index averaged 3.1 per cent in Q1 2023, down from the 6.6 per cent recorded in the previous quarter, and well below the recent peak of 11.6 per cent, achieved in Q1 2022.

Unique inflationary conditions in Türkiye resulted in three of that country’s cities recording triple-digit growth over the year, while European cities Zagreb, Budapest and Skopje each delivered property price growth above 20 per cent.

Among Australian cities, Perth followed Adelaide in 45th place with its 5 per cent growth. From there it was all negative territory and rankings in the hundreds. Darwin placed 112th (-2.2 per cent), Brisbane came in at 118 (-3.8 per cent), Canberra 133rd (-6.4 per cent), just ahead of Melbourne (136; -6.8 per cent) and Sydney (138; -7.4 per cent). Hobart bettered just seven cities on the list as it ranked 143rd with prices falling 8.7 per cent.

Source: Knight Frank Research, Macrobond.

A tough year for property globally

Annualised price growth across the Knight Frank Global Residential Cities Index has fallen sharply in recent quarters, from a high of nearly 12 per cent at the beginning of 2022, when cities around the globe were experiencing a bounce in demand for accommodation following pandemic lockdowns.

The Knight Frank report found that among all 150 cities prices rose on average by 3.1 per cent in the 12 months to March 2023 but with the slowdown in price growth accelerating.

More than half (51 per cent) of the cities in the index saw prices fall over the most recent three-month period, with seven markets seeing prices fall by more than 5 per cent.

According to Statista, the global inflation rate in 2022 was 8.7 per cent and so far in 2023 has averaged 7.0 per cent, far outstripping the broad measure of global property price growth.

The Knight Frank report said the key issue for all markets remains the outlook for inflation, interest rates and economic activity.

“The Federal Reserve in the US seems to be closing in on peak rates in the current cycle, as inflation across the US slows rapidly,” the report noted.

“Other central banks will likely follow through 2023, with falls in Eurozone and UK inflation lagging the US by between three and six months.”

Liam Bailey, Knight Frank’s Global Head of Research, said the slowdown in housing markets is unsurprising given the shock of higher interest rates in developed economies.

“Our latest results confirm that more than half of key global city markets saw prices fall in the most recent three-month period,” he said.

2024 may bring brighter real estate news

Looking ahead, the remainder of 2023 is seen to be sluggish at best, with more upside to world property markets expected to evolve in 2024.

“We need to expect further price falls through 2023 as markets adjust to higher debt costs, however, the downward shift in inflation in the US and other economies points to improving economic conditions,” Mr Bailey said.

“Economic fundamentals – wage growth and economic expansion – should permit a return to growth for most markets from 2024.”

The global economy will expand 3 per cent this year, down from 3.5 per cent last year, the International Monetary Fund (IMF) said in its latest World Economic Outlook on 24 July.

That’s a 0.2 per cent upgrade from its April projection. The IMF noted that global economic activity in the first quarter of the year proved resilient. Energy and food prices have come down sharply from their war-induced peaks, allowing global inflation pressures to ease faster than expected.

The IMF, which earlier this year labelled Australia’s property market the second riskiest in the world, has said balance of risks remain tilted to the downside.

“Interest rates are now in contractionary territory, weighing on activity, slowing the growth of credit to the non-financial sector, increasing households’ and firms’ interest payments, and putting pressure on real estate markets,” it reported in its Outlook.

“Core inflation, meanwhile, remains well above target and is declining only gradually. Nevertheless, stronger growth and lower inflation than expected are welcome news, suggesting the global economy is headed in the right direction,” the IMF concluded.

Source : AustralianPropertyInvestor

The post In Property Market World Cup, Sydney and Melbourne in Relegation Zone appeared first on Amora Escapes.

House prices have ‘further to fall’

The summer is likely to see price cuts become even more widespread, and we may well see house prices fall more significantly.

Sarah Coles

HEAD OF PERSONAL FINANCE AT HARGREAVES LANSDOWNE

Higher mortgage rates look set to add further downward pressure to the housing market in the U.K.

Mortgage rates continue to rise

The post Britain’s House Prices Are Slumping as Mortgage Rates Soar — and There Could Be Worse to Come appeared first on Amora Escapes.

Despite the ‘new normal’ of higher interest rates, 2023 will continue to offer valuable opportunities to real estate investors who are strategic in their property selection.

Property markets in trade exposed capitals, such as Darwin (pictured), Perth and Brisbane are well poised to return to a growth phase.

Source: api magazine

The post Top three 2023 property market drivers appeared first on Amora Escapes.