FNB anticipates that the South African housing market will benefit from a drop in inflation, currently at 4.6% in July, and subsequent interest rate cuts. As inflation decreases, FNB forecasts two 25-basis-point repo rate cuts in 2023 and an additional cut in 2025, lowering the repo rate from 8.25% to 7.50%. This, combined with easing energy constraints, improved global sentiment, and reduced political uncertainty, has led FNB to revise its GDP growth predictions upward to 1.0% in 2024 and 1.8% in 2025.

The bank expects these factors to encourage home-buying activity and house price growth, although current demand remains subdued. The FNB House Price Index showed a 0.6% year-on-year growth in August, unchanged from July. Mortgage market expansion also slowed, reflecting stringent lending conditions and reduced affordability. While loan-to-price ratios have stabilised, mortgage volumes are still declining due to weakened demand.

In the rental market, rental inflation dipped slightly to 3.2% in Q2 2024, with vacancy rates falling but still higher than pre-COVID levels. High interest rates are making renting more attractive, though excess rental supply persists. New-build housing stock, particularly in the affordable segment, is declining, reflecting weak demand. The recovery of the housing market depends on multiple factors, including economic growth and global conditions, though improving inflation prospects signal a slow turnaround.