BetterBond
Four of the nine regions covered by BetterBond managed to record price increases in real terms (above inflation). Mpumalanga won the gold medal for this indicator, followed by the two Johannesburg regions.
The month in numbers
- R1.48 million – average home purchase price for buyers aged 31 to 40 years
- R1.57 million – average home purchase price for all buyers
- 52% – Gauteng’s share of total home loans granted
- 29.4% – increase in loans granted for building purposes
BetterBond index of home loan applications
The encouraging and swift recovery in property market activity after the relaxation of the COVID lockdowns did not last long. South Africa did not escape the higher global inflation, mainly caused by a 700% increase in ocean freight charges and a 270% increase in Brent crude oil. Monetary policy became restrictive, taking South Africa’s prime overdraft lending rate from 7% to 11.75%, its highest level in 14 years.
Predictably, the sharp increase in debt-servicing costs led to a decline in the number of new home loan applications, with the relevant BetterBond index having declined by 19% since the repo rate started to increase.
Fortunately, the consumer price index has been comfortably within the Reserve Bank’s target range for a year, and the anticipation of an imminent lowering of interest rates has now seen a 10.3% YOY increase in home loan applications.
Average home purchase price
Following a nifty YOY increase of 5.6% in the average home purchase price for all buyers during Q2 2024, July’s average price was virtually static, most likely due to prospective buyers waiting for a relaxation of interest rates. During Q1 2022, when the effect of the rising interest rate cycle started to kick in, home prices for first-time buyers were R226,000 less than the overall average. This discount has now increased to R295,000. It is encouraging to note that in July, the YOY increase in the average home purchase price for all buyers amounted to 7.5%, considerably higher than the current inflation rate of 5.1%.
Average deposit for home purchase
The relentless increase in deposits required for access to home loans continued in July, with a new record high of R325,000, on average for all buyers. Fortunately for first-time buyers, the average deposit for home purchases declined marginally from R206,000 in Q2 to R193,000 in July.
The YOY increase in the average deposit for all buyers amounted to more than 11% in July, while the increase over the previous month was a whopping 16%. This is a clear reflection of continued nervousness among lending institutions over prospective homebuyers’ financial dispositions. Any lowering of interest rates, which may become a reality in September, is bound to start reversing the upward trend in the deposits required for home purchases.
Regional composition of home loans granted (12 months to July 2024)
During the 12 months to July 2024, Gauteng was once more the dominant region for residential property market activity, with Greater Pretoria and Johannesburg accounting for 52% of home loans granted. The Western Cape also remained active, with a 20% share of the market for new home loans, followed by KwaZulu-Natal with 11%. Urbanisation remains an unstoppable global phenomenon, and South Africa is no exception, with metropolitan areas acting as a magnet for job seekers and students that flock to the array of educational institutions that are absent in rural areas
Percentage change in average home purchase price by region (12 months to July 2023 & 2024)
A large degree of regional home price volatility has been a feature of the home price data during the 12 months to July 2024, with a range of more than 24 percentage points between the best and worst performing regions. Although only three of the nine regions covered by BetterBond experienced declining home prices, only four of them managed to record price increases in real terms (above inflation). Mpumalanga won the gold medal for this indicator, followed by the two Johannesburg regions. North West suffered a double-digit decline in the average price for homes sold during the past 12 months, most probably due to relatively depressed prices for several of the region’s export commodities in the mining sector, as well as the recent drought, which has exerted a negative impact on the agriculture value chain.
