House price inflation could reach 3.5% for 2025 but it will more likely end the year at around 2.5% says Lightstone.
Lightstone is not forecasting a turnaround in the residential property market with the high road scenario of 3.5% relatively modest, and the low road scenario assuming a continuation of conditions characterised by low economic growth and uncertainty on the protection of property rights, says Paul-Roux de Kock, Chief Analytics Officer at Lightstone.
This does not consider major disruptions from ‘black swan’ internal events like the collapse of the GNU, or global issues like the USA’s tariff adjustments, a global recession or a geopolitical fallout.
The mid road scenario is built around polling data from SARB on expected movements in GDP, CPI, and the repo rate. GDP is expected to grow at around 2.4%, CPI to slowly increase from 3.3% in Q1 2025 to 5% in Q4 2025 and interest rates to remain stable throughout the year.
The high road scenario predicts more favourable foreign investment with projected GDP growth of 3% and a potential decrease in CPI to 2.75%. This situation may lead SARB to lower interest rates, likely resulting in a 25-basis point cut in late 2025. In this case, the high and mid-value market segments, which show an upward house price inflation trend, are expected to benefit the most, potentially ending the year at around 3.5%. Sectional title properties, which started the year on an upward path, would also be supported in this scenario.
The low road scenario expects that SA’s limited economic growth, paired with reduced foreign investment, will result in a 2% decrease in GDP. CPI inflation is projected to rise to 5.5%, possibly prompting SARB to increase interest rates by 25 basis points to manage inflation. This scenario suggests a subdued market, with house price inflation for all residential segments likely falling to approximately 1.5% or lower.
“The housing market is very much dependant on economic growth and there is a delicate balance between the opportunity and risk of owning property in South Africa. Stable rates and moderate growth could sustain some momentum, but the true upside depends on improved investor and homeowner confidence, combined with a rapid improvement in economic growth. Rising inflation and stalled economic growth could weaken demand and slow price increases across the board. These forecast scenarios indicate just how sensitive the market is to broader economic factors and policy decisions,” says de Kock.
While house price inflation for sectional title properties grew steadily in 2024, it moved sideways for freehold properties with projections for 2025 similar with highs of around 3.5% and lows of around 1.5%.
House price inflation for high value properties and mid value properties could reach 3.5% if the high road scenario emerges, but it is more likely to sit at around 2.5%, or to drop to just above 1.5% for high value properties and just below 1.5% for mid value properties – if conditions worsen and the low road scenario happens.
The growth in house price inflation within the luxury band is anticipated to be moderate. Projections indicate a potential increase of 2.5% under favourable circumstances, while the low road scenario may result in a growth rate of approximately 1%.
