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The April BetterBond Property Brief reveals a market under pressure

The April BetterBond Property Brief reveals a market under pressure

Staff writer

Amidst political uncertainty (what’s going to happen on voting day?) and a historically high repo rate, the housing market is showing signs of strain, though there has been a mild increase in home loan applications:

  • R7.8% – QOQ increase in home loan applications
  • R1.26 million – average home purchase price for first-time buyers
  • R1.05 million – average national home loan for first-time buyers
  • 9.6% – YOY increase in the average home purchase price in the Eastern Cape

Home purchase prices

Home prices continued to recover during the first quarter of the year, with the YOY growth rates for both first-time buyers and repeat buyers reaching their highest levels since Q4 of 2021. With growth of 7.2%, the average home price for all buyers was significantly higher than inflation during Q1 of 2024. It was also the second successive quarter that average home prices have increased in real terms – suggesting that a more robust growth phase is around the corner. All that is required for this to happen is a relaxation of monetary policy, which may occur in May.

Regional composition of average bond value – all buyers and FTBs (12 months to Mar 2024)

During the 12 months ended March 2024, average home loan values managed to increase in four of the nine regions covered by BetterBond, with the national average also increasing, albeit marginally. These trends are indicative of a bottoming out of the slowdown in the residential property market ever since interest rates started to increase at the end of 2021. The largest regional differential between home loans for first-time buyers and all buyers occurred in the Eastern Cape (26.3%) and the lowest differential was in Johannesburg North West (9.4%). The highest average home loan for first-time buyers was in the Western Cape (R1.32 million), which was 83% higher than for the Eastern Cape (R719,000).

Percentage change in average home prices by region (12 months to Mar 2023 & 2024)

During the 12 months to March 2024, average home prices in three regions managed to outperform the consumer price index (CPI), with the Eastern Cape the stand-out region at a YOY growth rate of 9.6%. The national average increase in home prices for all buyers was 4.4%, marginally below the current inflation rate of 5.6%. Although the Greater Pretoria region has been experiencing home price declines, it remains the second priciest region, with an average home price of R1.64 million, just above Johannesburg North West at R1.62 million. The Western Cape still leads the pack by a considerable margin at an average home price of R2.05 million.

Percentage home loans granted per home price bracket

Since the Reserve Bank’s MPC decided to lift South Africa’s prime rate (via the so-called repo rate) from 7% towards the end of 2021 to the current level of 11.75%, residential property market activity has been relatively subdued. This phenomenon is particularly evident for prospective homebuyers in the price range below R1 million – a clear indication that restrictive monetary policy is having a more pronounced negative impact on lower-income groups. Since Q1 of 2022, the share of home loans granted for homes under R1 million has declined by 12.1%, compared to an increase of 16.8% in the share for homes priced at more than R2 million.

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