Local consumer confidence, which has rebounded to a five-year high in Q3 2024 – the third consecutive quarter of improvement and the highest reading since mid-2019 – has received another significant boost with the Monetary Policy Committee’s announcement today (19 September 2024) of a 25bps cut in the repo rate, heralding the start of a downward interest rate cycle.
Since the latter part of 2023 there has been a marked improvement in consumer confidence according to the FNB/BER Consumer Confidence Survey. During the past six months alone, consumer confidence has surged by 10 points, signalling a significant recovery in consumers’ willingness and ability to spend due to a more positive outlook. This is a major positive for the housing market, particularly in spring when residential market activity conventially begins picking up again.
Hopefully this is the start of the long-awaited interest rate cutting cycle, and with things moving both globally and locally in a more favourable direction, it provides scope for further rate cuts and significant relief for households and therefore a more supportive environment for a recovery in the housing market during the next 12-18 months.
Lower inflation, four consecutive fuel price cuts, plus the prospect of further interest rate relief during the remainder of the year will bolster real disposable income, while the absence of loadshedding for 175 days is further contributing to the improved economic outlook. It is positive for both economic growth and price pressures, as businesses and households no longer feel pressured to find and fund alternative sources of energy.
With four consecutive monthly reductions in the SA fuel price, the easing of both food and energy prices has seen the local inflation rate decline quicker than expected, now sitting at 4.4% in August – below the Reserve Bank’s 4.5% target rate, with core inflation (excluding food and energy prices) falling unexpectedly to 4.1% in August, providing ample scope to begin cutting interest rates.
Furthermore, global central banks are shifting their attention to supporting economic activity via lower rates, now that the inflation risks are abating.
Here in South Africa, commentators are predicting 50bps rate cuts in total before the year-end, while the Federal Reserve Bank is likely to cut by 100bps by the end of 2024. So with the Rand holding up, and with weaker global oil prices, SA analysts are forecasting a total of approximately 50bps during the remainder of 2024, resulting in just over 100bps in total during the next 12 months.
In the local residential property market we have seen a shift to cash purchases and investment acquisitions during this period of relatively high interest rates, but as interest rates begin to decline and affordability returns to the market we anticipate that first-time buyers and those requiring loans will come more to the fore.
With the formation of the GNU (Government of National Unity) having been well received by financial markets, we also anticipate that any regions or districts which can be seen to have benefited from a change in governance since the May elections could potentially see a rebound in prices and activity.
Going forward, our outlook for the residential property market is optimistic, backed by an uptick in activity across all sectors of the market, including the luxury market which has proven resilient over the past few years – particularly in the Western Cape.
For further information visit www.pamgolding.co.za
All above comments by Dr Andrew Golding, chief executive of the Pam Golding Property group
