Following a national election outcome that has been well received by global capital markets and domestic business leaders, the new government of national unity (GNU) is committed to preserving the country’s constitution and maintaining the principle of private property rights. In the July BetterBond Property Brief, the focus returns to the repo rate.
The month in numbers
- 5.6% – YOY increase in average home price for all buyers
- R320,000 – average deposit for home purchase by all buyers
- 6.9% – YOY increase in the construction input cost index
- 35% – share of loans granted to homes valued between R1 million and R2 million
Home loan applications
The modest improvement in new home loan activity that started during Q1 2024 was halted in its tracks during Q2, with zero growth recorded. This was no surprise, as the uncertainty over the outcome of the national elections negatively affected a range of key economic indicators, including the Absa/BER purchasing managers’ index (PMI) and the Afrimat construction index. Fortunately, the election results were well received, and a further recovery of activity in the residential property market is on the cards, with the chances of an interest rate cut in July improving by the day.
Average home purchase price
During Q2 2024, the YOY increases in home prices for first-time buyers and repeat buyers both increased at a marginally higher rate than inflation. The increase of 5.6% in home prices for all buyers compares favourably to the annualised increase in the consumer price index (CPI) of 5.2% in May. The QOQ increase of 1.4% for all buyers is marginally lower than the average QOQ increase of 1.7% over the past 17 quarters, but this figure has been negatively impacted by the highest lending rates in 14 years. A meaningful recovery of the demand for residential property is on the cards when interest rates start declining again, most likely during Q3.
Average deposit for home purchase
During Q2 2024, the value of deposits required for repeat homebuyers managed to record a marginal QOQ decline, pointing to a more accommodating stance by financial institutions. Unfortunately, the rising trend in this key indicator of residential property market activity was 17% higher than a year ago for all buyers and more than 16% higher for first-time buyers. During Q2, the average deposit required for first-time buyers went above the R200,000 level for the first time. The rising trend for home loan deposits is likely to be reversed once interest rates start declining.
Average home loan value for FTBs by key region (12 months to June)
During the 12 months to June 2024, the average value of home loans awarded to first-time buyers increased by 2.9%, which is significantly lower than the current annualised rate of increase in the consumer price index (CPI). Although the average YOY home price for first-time buyers managed to beat inflation (only just), the difference between these two rates of increase is explained by the relentless rise in the value of deposits required by first-time buyers. During the 12 months to June, only Johannesburg’s north-western suburbs and the Western Cape managed to record meaningful YOY increases in average home loan values, which was sufficient for a positive average national value.
Percentage share FTB share of total home loan applications (12 months to June 2024)
During the 12 months to June 2024, home loan applications from first-time buyers was the most prevalent in the North-West province, but this region only represented 2.1% of all applications. The Free State and Northern Cape had the second most home loan applications for first-time buyers, followed by the region with the highest level of activity (22% of all applications), namely Johannesburg’s South-Eastern suburbs. Over the past 12 months, only 3 regions managed to increase their share of loan applications for first-time buyers, namely, Free State and Northern Cape, KwaZulu-Natal and Johannesburg North West, with the biggest decline emanating from Johannesburg’s North-Western suburbs (-6.1%).
