Durban's real estate market should power through inflation and interest hikes

Despite the overall climate of rising inflation and price hikes, Head of Research at real estate consultancy JLL in South Africa Zandile Makhoba expects the real estate sector to remain on a growth trajectory, particularly in Durban where developers are confident about new models. 

The South African market is currently struggling with sustained inflation, with year-on year inflation exceeding 5% over the last two months in particular. Prices are skyrocketing, and experts are anticipating sluggish economic growth as the consumer market loses its propensity to spend.

Inflation levels are only expected to increase over the near future, as explained by Senior Economist at Capital Economics Josh Ashbourne. Continued economic growth and high inflation add to the likelihood of another 25-basis-point rate hike in the first quarter,” he said.

As a result, the South African Reserve Bank is currently engaged in deliberations on whether or not to increase interest rates to negate the effects of inflation. While a hike in interest rates would help stabilise the situation, it would be detrimental to the plans of the new President to attract substantial foreign investment. 

The situation is affecting various sectors in the country, although Head of Research at JLL South Africa Zandile Makhoba argues that the resilience of the real estate sector will carry it through this rough period, speaking specifically in the context of Durban.

According to Makhoba, the relatively low value for Durban’s real estate sector this year is the result of a focus on construction in the sector this year. She predicts another slow year of growth next year, but attributes this to the elections that are upcoming, which will prompt developers to bide their time.

“Developer confidence in the Durban real estate market remains firm, with activity strong across all sectors, and continued growth of mixed-use precincts shaping the coastal city. Improved trade efficiency due to port investment and other public infrastructure is setting a positive tone for economic activity in the year ahead,” she said.