Global inflation is decelerating, giving central banks room to signal the end of their rate hiking cycles. In South Africa, interest rates appear to have peaked, with a cutting cycle expected in the latter half of 2024. However, this forecast faces short-term risks, as further hikes may be triggered by rising inflation or the Federal Reserve’s actions. In contrast, medium-term risks favour potential rate cuts if the Fed funds rate or domestic inflation declines unexpectedly.

The global housing market, which saw a strong resurgence in 2021-2022, is now moderating. Rising debt costs and inflation are dampening demand, leading to falling real house prices worldwide. In advanced economies, this reflects resilient labour markets and housing shortages, while emerging markets face challenges from high interest rates, slow income growth, and rising unemployment, especially among younger buyers.

In South Africa, the FNB House Price Index growth decelerated to 1.1% year-on-year in July, down from June’s 1.6%. Mortgage volumes are reverting to pre-pandemic levels, with the average bond amount declining by 3% in the second quarter of 2023—the first such decline since 2009. Property transfer duties have dropped by 10.3% year-to-date, reflecting a downscaling trend among buyers due to affordability constraints. Although sellers are adjusting their asking prices, regional variations persist, with the Eastern and Western Cape showing relatively stronger market performance. Lower-priced segments exhibit resilience, supported by higher-income households seeking budget-friendly options.