2024 Property Predictions - Hamilton's Property Portfolio

Homeowners and potential property investors have every reason to be concerned about the current economy on a macro scale. However, with a considered approach, one can still remain optimistic about the real estate market, provided investors keep up to date with several important factors.

Within this analysis, we take a closer look at pivotal trends and data informing the current real estate market and what key areas you should look at before making the buyer's decision.

Economic Projections

The future of the property market remains to be determined. As such, economic projections take centre stage. The real GDP growth of 1.2% in 2023 and 1.3% in 2024, as projected by the International Monetary Fund (IMF), sets a foundational tone of stagnation. Yet despite claims of an onset recession, recovery following the Pandemic has managed to exceed expectations.

Investors keen on navigating the 2024 landscape must consider these figures, understanding their implications on property values and market stability. Economic indicators, often the compass for property investment decisions, provide a lens through which to gauge the industry's resilience and potential challenges in the long run.

Inflation and Interest Rates

Inflation, a cornerstone of economic health, plays a pivotal role in shaping the financial dynamics of the real estate market. The decline in consumer price inflation to 6.9% in January 2023, coupled with the prevailing prime interest rate of 11.75%, demands astute attention from investors. 

The balance between inflation and interest rates can significantly impact the cost of financing for property investments, thus influencing the feasibility of homeownership and the attractiveness of real estate as an investment class.

Property Price Dynamics

Investors eyeing the 2024 market must pay close attention to its dynamic nature. The Lightstone Residential Property Index, as of Q2 - Q3 2023 illustrates that in the second quarter of 2023 (April-June), the South African real gross domestic product (GDP) grew by 0.6%, building on a 0.4% increase in the preceding quarter. However, projections by Chief Analytics Officer Paul-Roux De Kock suggest a spectrum for House Price Inflation (HPI) in 2023, ranging from 0.9% to 3.7%. 

The discerning factor lies in understanding the average figures and the nuanced performance of coastal properties and specific value bands inland. Investors should heed these indicators to decide where to allocate their resources for optimal returns.

Tenant Behavior and Rental Market Resilience

The TPN Rental Monitor Residential Sector Q3 2023 Report unveils a heartening statistic.
Despite a narrowed rental escalation, tenants have improved payment behaviour for the third consecutive quarter despite economic challenges, with 83.34% in good standing. 

Despite a slow rise in rental escalations to accommodate sensitive consumers, smaller provinces experience high vacancies, except for the Western Cape, which has the lowest vacancy rate. The scenario indicates tenants' willingness to navigate rental increases, but a delicate balance exists between residential vacancies and investors' ability to demand higher rents.

Investment Strategies for 2024

The final frontier is formulating effective investment strategies. Despite uncertainties, the data suggests that ungeared return on property, factoring in capital growth and net rental yield, remains promising. 

With an average property price growth of 3% and net rental yields ranging from 6% to 8%, investors are presented with a nuanced landscape. Consideration of historical property price growth, increased input costs, and rental escalations become the bedrock for crafting resilient and forward-thinking investment strategies tailored to the evolving nuances of the 2024 property market.

Taking the above impacts and influences into account we are looking forward to the year ahead with positivity and an optimistic outlook.

Read our previous article here

Contact one of our offices below; we look forward to hearing from you:
Gauteng: 011 463 0155
Cape Town: 021 418 0328 
Garden Route: 044 050 3295
Eastern Cape: 076 927 7787
Winelands: 021 863 0551
Mauritius: +230 5723 0369
Email: reception@hamiltons.co.za

Hamilton's Property Portfolio holds a Fidelity Fund Certificate issued by the Property Practitioners Regulatory Authority.