Adriaan Grové, founder and MD of Entegral and MyProperty, said that the recent numbers from Statistics South Africa meant that the residential property market was “thinning
Image: Karen Sandison / Independent Newspapers
Recent figures from Statistics South Africa show that less residential developments are being completed, which bodes well for sellers – but will mean higher prices for those looking to buy, especially if they are potential first-time homeowners.
The government agency noted in a recent economic wrap that the value of residential buildings dropped 4.2% in May, with January being especially tough. Residential buildings as well as additions and alterations showed some recovery in February and March, but not enough to lift their quarterly growth rates into positive territory, it said.
Adriaan Grové, founder and MD of Entegral and MyProperty, said that the recent numbers from Statistics South Africa meant that the residential property market was “thinning”. He explained that “there’s a clear decline in the number and value of residential building plans approved, which serves as a leading indicator of future construction activity”.
This, Grové explained, means that “we’re likely to see even fewer homes being built in the coming months”. What this translates into is buyers potentially facing tighter inventory and firmer prices, especially in high-demand areas, he noted.
However, those selling can expect more competition and potentially higher prices.
“For estate agents, this translates into a premium on exclusive resale mandates, especially for well-priced, energy resilient homes. Sellers can expect rising competition among agents for quality listings,” said Grové.
Berry Everitt, CEO of Chas Everitt International, concurred that prices are set to be under upward pressure “for at least the next couple of years”. This, he added, is despite all the new flat and townhouse construction that is currently taking place and capturing attention in Cape Town, Johannesburg and many other centres.
Everitt said that many of the projects now coming out of the ground were planned two and even three years ago, at the height of the post-COVID boom, and have been on ice since rates began to rise in November 2022. He explained that there were fewer plans being approved, which would also lead to housing shortages and higher prices.
There is also the effect of rising interest rates between the COVID-19 years and last September, Everitt said. “There is apparently still a lack of appetite among consumers, builders and developers for both new housing and the refurbishment of existing housing,” which is despite a one percentage point decline since last September, he added.
Everitt added that new buyers, in particular, will find homes less affordable. “This could be alleviated somewhat if government plans to speed up the development of new affordable and social housing in city areas closer to places of work come to fruition, but it remains to be seen how long this will take,” he said.
John Loos, senior economist at FNB Commercial Property Finance, is hopeful that the trend will turn positive and that more plans will be passed. “We expect to see new building activity turn positive in the latter half of 2025 after severe weakness in recent years,” he noted.
Of interest, said Grové, is that the Western Cape bucked the downward trend in developments with an 18% year-on-year increase, while Gauteng saw a sharp year-on-year drop of 22%, indicating that future stock shortages will vary by region.
IOL