Market overview and current trends
- House price growth accelerates: The FNB House Price Index rose to 2.6% y/y in May, up from 2.4% in April, driven by stronger performance in the middle- to upper-priced segments.
- Market recovery led by supply contraction: While our market strength indices point to a less deteriorated market, the recent recovery is largely supply-driven. New housing completions are down 14.0% year-to-date, following sharp declines in 2023 and 2024.
- Rental market remains subdued*: Rental inflation held steady at 2.9% in 1Q25. Vacancy rates rose slightly to 6.7%, though still below last year’s levels. Overall, the slight uptick in vacancy rates, despite a continued decline in the supply of new flats and townhouses, may signal a shift from renting to homeownership, driven by declining borrowing costs and post-pandemic behavioural changes.
Outlook
- Economic outlook: GDP growth for 2025 has been revised down to 1.1% due to ongoing policy and logistical challenges, with a gradual recovery expected through 2027. While household consumption remains stable, investment is constrained, and economic reforms are slow.
- Interest rate outlook: We expect a 25bps repo rate cut by September, lowering the rate to 7.0% to support affordability and market sentiment. However, the SARB may implement its 3.0% inflation target earlier than expected, potentially limiting further rate cuts. While this could weigh on short-term affordability, it would support long-term macroeconomic stability.
- Housing market outlook: Continued rate relief should support buying activity, particularly in the low- to mid-market segments, while accelerated economic reforms will be essential to improving sentiment and activity in the higher-priced segments. Year-to-date, the HPI has averaged 2.0%, slightly ahead of our initial expectations. This suggests a still subdued, yet stronger-than-anticipated market. At this pace, risks to the price growth outlook are skewed to the upside, although global uncertainty continues to cloud the broader outlook.
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