House prices are rising in SA — here’s why

The FNB Home Price Index (HPI), released on Wednesday, indicates that houses in South Africa are becoming increasingly costly due to high demand.

FNB reports that house values increased by 2.2% in April, up from 2.0% in March. The bank states that this is the fastest pace in approximately two years, since March 2023.

Siphamandla Mkhwanazi, senior economist at FNB, attributes the growth in house values to improved demand.

Not many people are buying houses

According to information obtained from the Deeds Office, the number of people buying houses remains 16% below pre-pandemic levels.

Mkhwanazi attributes this transaction volume to the slow market recovery since the pandemic.

However, estate agents report an increase in positive sentiment, with activity ratings reaching a three-year high in the first quarter of 2025.

“Market outcomes are still modest, as reflected in slow transaction volume growth and slightly longer selling times (from 11 weeks in the fourth quarter of 2024 to 12 weeks and one day in the first quarter of 2025),” he adds.

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Why are people not buying houses?

Mkhwanazi says despite positive sentiment, there is still caution among buyers due to the impact of the pandemic-induced cost-of-living crisis, which has been made worse by global uncertainty.

“Many prospective buyers, particularly in the affordable segments, may still face significant hurdles in the home-buying process related to affordability,” he added.

However, there is a demand for affordable housing in the country. In the lower-priced segments, potential interest rate cuts by the South African Reserve Bank (Sarb) and a potential 10% increase in the transfer duty threshold could stimulate demand.

These factors suggest a potential shift in demand towards more affordable housing options amid increased uncertainty.

Prices to increase by 3% by 2026

He says the recent dip in consumer confidence, due to heightened global and domestic uncertainty, is likely to disproportionately impact affluent segments, potentially leading to slower sales and price stagnation.

“With the HPI averaging 1.8% year-to-date, there is an upside risk to our 1.9% forecast for 2025. We currently project house price growth to approach the 3% mark by 2026.”

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