What drives the property market?

The first quarter of the New Year has firmly placed the property market as a buyer's market with a high availability of excellent options at lower pricing. Estate agents have been surprised at the direction change as the post-GNU formation euphoria provided a boost to consumer and business confidence.

When considering the likely trending direction of any asset market, it is useful to consider the underlying fundamentals that drive that market and if these are moving up, down or sideways. The impact of cutting off USAID funds flow to South Africa and the uncertain political landscape remains to be seen, but the FNB/BER Consumer Confidence Index did drop to -20 in Q1 2025, down from -6 in the previous quarter reflecting how the general consumer market is currently viewing the landscape. Property is by nature a long-term investment and confidence is a determining factor for people deciding to invest.

Our cost of money, measured by the current prime lending rate remains at 11%, which is high considering that our CPI inflation rate is as low as 3,2% and the PPI rate is as low as 1% as measured in February 2025.

Real interest rates at 7,8% would be viewed as excessively high by economists. With producer price inflation well below consumer price inflation, it indicates that the trend remains down for inflation.

High domestic interest rates defend the Rand exchange rate in the short term but have a damaging effect on local production. This is reflected in our GDP growth rates, which averaged 0,6% for 2024 being the slowest growth since 2020. Without economic expansion and the subsequent increase in disposal household income, markets cannot expand, and property prices remain under pressure.

As a seller, when facing a property market characterized by uncertainty and low demand the best advice is not to panic. Although many people can delay the sale of a property and potentially rent the home for the next few years, the general market does need a sale to progress in their lives.

Pricing is the key factor that has to adjust downwards to meet market demand and where a transaction can result. The beautiful thing about a market is that it disciplines all sellers over time and will dictate the level at which a property trades.

Those sellers who are actively watching and managing prices to meet demand will eventually realize a sale. In these markets where buyers are spoilt for choice sellers need to present their properties in the best possible condition.

Clean, neatly presented homes that are uncluttered and filled with natural light will attract the attention of buyers and therefore more likely to trade. Sellers can shape the probability of success in the market by actively working to get and keep their properties in that showroom condition.

Once the home is ready to present to the market, the strategy the seller adopts will result in success or failure. Select the agents you decide to work with carefully with a well-articulated marketing plan.

Base pricing on actual transfer data and not on what was spent on the property, previous offers or the cost of construction as these are largely irrelevant in determining what a willing buyer will pay for a property.