Top trend: Market holds its breath for rate cuts
Category News
Global house prices have continued to rise despite central banks' efforts over the past two years to combat inflation through higher interest rates, according to the latest Global House Price Index compiled by Knight Frank. But this growth is likely to slow down now unless rates come down significantly and the supply of affordable housing increases.
The KF index covers 56 key markets and rose 3,5% in the third quarter of 2023, compared to 2,2% in the second quarter, as limited stock availability continued to underpin property values. However, the company notes, transaction volumes continued to present a challenge.
Sales declined by 15% to 25% in many developed economies last year and sluggish activity is likely to persist through 2024 and potentially into 2025, until rates have been lowered substantially.
And the overall picture is much the same in SA. The demand is there but affordability is a problem for many prospective buyers, especially at the interest-rate sensitive lower end of the market, with the result that transaction volumes dropped by 29% in 2023 compared to 2022.
The Lightstone House Price Index for December shows national year-on-year house price inflation in SA at 2,52%, which was the lowest level since 2020. But closer analysis shows that inflation in the low value (less than R250 000) segment of the market was at a whopping 18,7%, the highest level in five years. Inflation in the mid-value segment (R250 000 to R700 000) was more in line with international trends at 3,9%, but also up on the previous year.
Certain provinces and cities also showed noticeably high property price inflation rates, namely Limpopo (5,88%), Mpumalanga (5,42%), and the Western Cape (5,10%), mostly as a result of available supply failing to keep up with high demand. But transaction volumes here - and in other provinces - are expected to remain relatively static until there is a significant reduction in interest rates.
Meanwhile, it's interesting to note that Turkey still holds the top spot in the Knight Frank house price ranking after eight years with a colossal annual house price inflation rate of 89.2% last year, followed by Greece (14%), Croatia (13,7%) and North Macedonia (11%).
Japan was the best performer in the Asia-Pacific region last year, with 6.3% annual growth, followed by India at 5.9%, while the worst performers, somewhat surprisingly, were Sweden (-11,1%), Slovakia (-10,1%), Finland (-9,6%), and Hong Kong (-8,7%).
Author: Chas Everitt