7 March 2024
The latest Absa Homeowner Sentiment Index (HSI), a comprehensive indicator of consumer confidence in South Africa's property market, showed a decline in positive sentiment as consumers expressed caution, spurred by concerns over economic conditions and their personal finances.
The HSI measures the sentiment of consumers on multiple facets, including the current timing for buying, selling, investing, opting to buy over renting, and undertaking renovations. The index results for the final quarter of 2023 reveals a continuation of the ‘wait and see’ approach by consumers who are deferring property purchases and potential first-time buyers opting to rent instead.
“Uncertainty around the macro environment, affordability, high interest rates and the high cost of living remained key negative drivers of sentiment in the fourth quarter of last year,” said Nondumiso Ncapai, Managing Executive of Absa Home Loans. “Despite a general decline in confidence, specific areas such as selling sentiment have seen slight improvements, suggesting an improvement in the outlook for certain pockets of the market.”
Key Findings:
- Overall Confidence: Positive responses regarding confidence in the property market stood at 78%, marking a 3% decline from Q3 2023. This figure is also lower than the scores recorded in the fourth quarters of the past three years, indicating a cautious outlook among consumers.
- Buy Sentiment: The sentiment towards buying property has decreased by 3% to 64% in Q4 2023, continuing a downward trend since Q4 2021. This represents a significant 12 percentage point drop compared to Q4 2021, highlighting growing hesitancy among potential buyers on the back of increased living costs.
- Rent vs. Buy Sentiment: Sentiment among current renters or those considering buying versus renting declined by 2% to 67% in Q4 2023. Here, sentiment has fallen by 11% since Q4 2021 and 4% year-over-year, reflecting a shift in consumer preference towards renting which is seen as more affordable and less risky than buying at present.
Interestingly, sentiment towards selling property has increased by 2% to 48% in Q4 2023, though still lower compared to Q4 2022. Respondents felt that it was better to sell when a property becomes unaffordable or when the time for an upgrade arrives. Investment sentiment decreased marginally by 1% to 76% in Q4 2023, continuing to reflect cautious optimism. Homeowners' sentiment towards renovations remained steady at 75%, consistent with Q3 2023 but showing a slight decline from Q4 2022.
“The subdued sentiment seen in the index echoes lower property market sales volumes experienced in 2023, with respondents indicating a need to spend sparingly until the economy stabilises,” Ncapai said. “However, a large number of respondents still saw property as a sound investment over the long term.”
As such, homeownership remains aspirational and a desirable investment for South Africans. While the outlook for consumers will remain strained in coming months, we expect to see some relief filter into the cycle for indebted consumers as interest rates improve in the second half of this year, Ncapai concludes.
