Global inflation continues to slow, signalling a potential end to interest rate hikes. In South Africa, forecasts suggest interest rates have peaked, with a cautious rate-cutting cycle likely in late 2024. However, short-term risks remain, including potential rate hikes if US Federal Reserve policies tighten or inflation rises unexpectedly. A global economic slowdown could accelerate the onset of rate cuts, aiding housing affordability.

Domestically, buying activity continues to decrease due to worsening affordability, with volumes returning to pre-pandemic levels. FNB’s House Price Index growth slowed to 0.8% year-on-year in August, down from 1.2% in July. FNB’s Valuers’ Market Strength Index reveals declining demand, while the supply of properties remains stable. Estate agents report longer selling times, with 67% of homes taking three months or more to sell, up from 56% in Q2 2023. Despite this, half of the agents anticipate an increase in activity in the affordable housing segment, driven by seasonal factors.

Economic resilience, despite structural challenges such as electricity shortages and railway inefficiencies, provides some optimism. Formal employment has returned to pre-pandemic levels, though wage growth remains below inflation. Compensation increased by 5% in Q2 2023, while inflation stood at 6.2%. However, wage expectations indicate potential increases above inflation in 2024, which may offer relief to consumers. Housing market dynamics reflect global trends, with affordability constraints and subdued demand in emerging markets, contrasting with labour market resilience and housing shortages in advanced economies.