The Hermanus Property Market: 2025 and Beyond
Category Area Focus
A Challenging Year in Review
Paul Kruger, Licensee at Seeff Hermanus and a National Board Member reflects on the hurdles the Hermanus real estate market faced over the past year. While many properties were listed for sale, a significant number failed to sell, attributed to several key factors:
1. High Interest Rates
The South African Reserve Bank's steadfast approach to maintaining high interest rates created financial strain for potential buyers, deterring many from entering the market.
2. 2024 National Elections and Political Uncertainty
South Africans remain highly sensitive to political changes and uncertainties. The 2024 elections caused market stagnation, as both buyers and sellers hesitated amidst the unpredictability. Although South Africa's democratic process is stable, vocal political leaders stirring emotional unrest compounded the uncertainty.
3. High Property Prices in Hermanus
Prospective buyers, particularly from Gauteng and other Regions, are often shocked by the premium property prices in Hermanus. Many realise they would need to downscale significantly, deterring them from making the move.
4. Unrealistic Seller Expectations
Properties priced appropriately sell quickly, while overpriced listings linger or are withdrawn. Many sellers, who are not under financial pressure due to owning their homes outright, remain inflexible. Buyers, in contrast, often view several properties before choosing the best value-for-money option. Sellers should aim to position their homes within a realistic price bracket to remain competitive.
Looking Ahead: 2025 and the Following Three Years
2025: A Promising Year Ahead
Paul Kruger expresses optimism for 2025, foreseeing a positive turn for both homeowners and buyers. Key factors include:
1. Lower Interest Rates:
Inflation in South Africa is projected to remain below the South African Reserve Bank's target for 2025, paving the way for potential interest rate cuts. In November 2024, the Consumer Price Index (CPI) inflation rate dropped to 2.9%, significantly below the Reserve Bank's midpoint target of 4.5%.
Investec Chief Economist Annabel Bishop attributes this decline to falling fuel prices since June. Modest petrol price increases during the second quarter of 2024 also contributed to the gradual decrease. Bishop noted, "Inflationary pressures in South Africa remain mild, generally lower than last year, and are likely to average below 4.5% year-on-year in 2024, compared to 5.9% in 2023."
Headline inflation for 2025 is expected to remain low, averaging around 4.0% year-on-year, with fuel prices playing a key role in driving this trend. However, recent data from the Central Energy Fund (CEF) indicates larger fuel price hikes may be imminent, driven by a weakening rand and rising international product prices. The weaker rand could heighten inflationary pressure from imported goods, posing a challenge to South Africa's inflation outlook.
Despite these risks, food price inflation has seen a dramatic decline. In November 2024, food inflation stood at just 1.6%, a sharp contrast to the 14.4% recorded in March 2023. The significant drop in food prices, which make up the largest component of headline inflation, has contributed to the rapid deceleration of overall inflation. For example, food price inflation fell from 7.0% in January 2024 to 1.6% in November, providing considerable relief to consumers.
This favorable inflation environment suggests that consumers could benefit from interest rate cuts ranging between 1.5% and 2%, offering much-needed relief to the market. If inflation remains below the Reserve Bank's target in 2025, South Africa may be poised for a period of economic respite.
2. New Property Developments
Several exciting property developments are on the horizon. These will introduce competition for second-hand properties, pressuring sellers to price competitively. Seeff is actively involved in marketing two major developments, alongside several boutique projects.
3. Political Stability
The Government of National Unity (GNU) is expected to maintain a slow but steady pace of governance, providing a foundation of stability for the market.
2026: Uncertainty Looms
1. Election-Driven Instability
The year will bring local and provincial elections, likely leading to sporadic unrest fueled by dissatisfaction over service delivery. While this may create short-term instability, the elections themselves are expected to proceed peacefully.
2. Government Struggles
The coalition government may face growing internal discord and rivalry as parties fight for dominance, exposing each other's weaknesses to win votes.
2027: A Year of Political Intrigue
The ANC will select a new president, likely the next leader of South Africa. This decision will be critical, with potential surprises that could reshape the political landscape. Early indications suggest rising tensions, more pressure on the GNU and unanswered questions.
2028: A Pivotal Election Year
The national elections will dominate 2028, determining whether the country continues its current trajectory or embarks on a new era. The cyclical nature of political and market fluctuations will likely persist, bringing both challenges and opportunities.
Final Thoughts
While the Hermanus property market faces ongoing challenges, strategic pricing and an adaptive approach can help sellers and buyers navigate the landscape. The coming years hold promise for growth and revitalisation, particularly with anticipated interest rate reductions and new property developments. As always, staying informed, positive and prepared will be key to success in this dynamic real estate market.
Author: Paul Kruger
