MAIN IMAGE: Kobus Lamprecht – chief economist at Rode Publications & Media and André van Rooyen – head of sales at PayProp
Kerry Dimmer
We’re condensing the results of recently released key reports: the Q4 2024 Rode Report (or #RR24q4) and the PayProp Rental Index Q4 2024 for you. The key takeout from both? Things are looking up (perhaps not as much as hoped for, but up nonetheless).
“We still expect house prices to recover in 2025 as local interest rates should average lower than in 2024, while economic growth is also forecasted to improve. But, don’t be overly optimistic as interest rates will probably not fall as much as previously hoped by many investors”, predicts Kobus Lamprecht, chief economist at Rode Publications & Media.
“The primary concern is the risk of higher inflation due to US tariffs on imports, should these be implemented widely. This also diminishes the prospects for local interest rate cuts, as it is dollar-positive and rand-negative, which could of course, elevate local inflation,” said Lamprecht.
House prices and sales
What are the drivers of change in house prices? For one, says Lamprecht, “changes in household incomes and changes in the interest rate lead to changes in house prices. That immediately affects the value of the home loans granted.”
The Rode Report refers to FNB data, showing that:
- The time that houses are on the market nationally declined in Q4 2024 to 11 weeks, down from 11,2 weeks in Q3.
- This is well below the long-term average of some 13 weeks, implying that sellers are quite reasonable about their asking prices.
- More homeowners than usual are selling due to financial pressure, which may account for the flexibility and accommodation of accepting lower prices.
- “In Q4, 26% of home sellers sold their houses due to economic strain, which is up from Q3 2024’s 23%. This is well above the 19% average since the end of 2007, when the FNB data series started,” says Lamprecht.
Outlook for residential market
Indicators show that the fundamental driver of house prices is ‘the economy, stupid’. “In November 2024, the indicator had increased for the 8th consecutive month year-on-year, but note that this increase came off a low base. Nonetheless, this improvement has coincided with growth in mortgages granted in quarters 2 and 3 of 2024.
“Looking ahead there is optimism about the semi-new government, better electricity supply and a lower interest rate,” said Lamprecht, although we note the recent re-introduction of load-shedding.
“One must also consider the Expropriation Act and investors’ dislike of the uncertainty surrounding it, which could affect foreign direct investment, thereby indirectly impacting the home market. In summary, a cocktail of factors has made the outlook for economic growth and interest rates more uncertain, yet a modest house price recovery remains likely.”
Rental market
“Buckle up, interesting times ahead” is the title of PayProp’s Rental Index 2024. The major insights include that 17,1% of tenants are in arrears; R9 051 is the average rent; 5,2% rental growth year-on-year; and Limpopo achieves the fastest rental growth.
André van Rooyen is PayProp’s head of sales. In the Index, he notes that there is healthy real-term rental growth alongside October, November, and December’s 2024 rental growth – the latter month being the highest recorded since December 2017.
Arrears at near record lows
Tenants who were behind on rent jumped to 18,3% across all provinces bar two, at the beginning of 2024, improving only slightly by end of Q4 to 17,1%. “This figure is cause for concern and may be an early indicator of worse to come this year,” says van Rooyen.
As a result, and for a year now, landlords and agents have been taking slightly larger deposits from tenants, with the average in Q4 being 1.31 times the average rent. This gives landlords more scope to make necessary repairs at the end of a tenancy, and means that deposits are more than keeping up with rising rent. The fact remains that tenants are still struggling with the ongoing impact of high interest rates and inflation, leaving them under more pressure than a year ago,
Rental agents and investors, advises the Index, should conduct thorough affordability assessments this year, to ensure their tenants can keep up with escalating rents and living costs.
Limpopo surprise
PayProp refers to Limpopo as SA’s ‘new rental growth leader’, having posted above-average rental growth in almost every quarter for the past two years. The average rent in the region reached R8 797 in 2024’s Q4, which is R874 more than in the previous year. In line with SA’s overall arrears figures, the province shows 17,0% of tenants in arrears, which is actually the fourth lowest in the country.
Across the board, Limpopo’s rental figures are all in positive growth, making it the hottest province in SA in which to rent a property.
Outlook
“Low inflation sets the stage for further interest rate reductions, which would make home buying more affordable for owner-occupiers and landlords,” says van Rooyen. “Economists are divided on the outlook, though. Some expect two more 25-point cuts this year, while others believe that a looming global trade war could keep the rate higher for longer. That being said, more small cuts would reduce the cost of debt repayments for tenants, but may not move the needle for many first-time buyers,” said van Rooyen.
“However, the residential rental market has gone into 2025 looking healthier than it has in many years.”
