Reprieve for under pressure property market in 2024
As 2024 starts Rawson Property Group’s sales, rentals, commercial and finance specialists share their analyses of this year’s key trends and events and explore the shifts most likely to occur in 2024.
Residential Property Sales
“Residential sales have been under a bit of pressure for some time now, largely due to the rapid interest rate rise and increasing cost of living,” said David Jacobs, Gauteng regional sales manager for the Rawson Property Group.
The effects of this pressure started becoming more noticeable from March/April 2023.
“We started seeing a noticeable drop in buyer demand, an increase in the average time a property stays on the market, and an uptick in distressed property sales,” Jacobs said.
“A lot of buyers who had bought at their full purse capacity – when interest rates were lower – were finding their financial obligations unsustainable.”
Trends among those buyers still active on the market also shifted from upscaling to downscaling. Jacobs said that this cost-consciousness is unlikely to change dramatically in 2024, and buyers will remain extremely price sensitive.
However, stabilising interest rates and inflation could unlock a pent-up wave of buyer activity with positive results for property price growth in the mid- to long-term.
And, as is the case currently, sellers with properties priced correctly in the relevant market conditions will continue to conclude successful transactions in reasonable timeframes.
“There are a lot of buyers who have put off property purchases to see what direction the market and economy is headed in,” said Tony Clarke, managing director of the Rawson Property Group.
“If the interest rates and inflation remain stable – or better yet, decline – in 2024, I think we could see a flood of pent-up demand hitting the market from around the second quarter.
Residential property rentals
The rental market definitely had a slightly easier time in 2023, with tenant payment behaviour showing notable improvement over the course of the year.
According to Jacqui Savage, national rentals manager for the Rawson Property Group, it’s an extremely positive sign that tenants are successfully handling the increased pressure on their household budgets.
According to credit bureau TPN’s most recent survey, rental escalations also improved in 2023, albeit modestly, climbing from 4.8% in Q2 to 4.84% in Q3.
“Higher rentals have been moderated by slow capital growth, though, thanks to subdued house price inflation,” said Savage. “Despite this, national average rental yields remain above inflation and increasing, with sectional title property enjoying stronger performance than freehold at present.”
As interest rates and inflation start to stabilise, Savage said pressure on tenants should ease. “Rawson rentals agents are seeing more willingness among tenants to negotiate rental escalations, which should contribute to healthier growth.”
Commercial Property
“2023 has been a tough year for commercial property,” said Craig Mott, head of business growth for the Rawson Property Group.
Of the three main commercial property sectors (office, retail and industrial) Mott said the office market has struggled the most. “There is still a significant oversupply. This has begun to show early signs of recovery as more workers return to office.”
Property finance
Property finance kicked off the 2023 year with skyrocketing interest rates and declining consumer affordability.
According to Leonard Kondowe, national manager for the brand’s in-house bond origination division Rawson Finance: “Despite the difficult market, lenders were still willing to finance property purchases.”
With interest rates on pause, and inflation taking a breather, Kondowe said signs are positive for 2024.