BetterBond
The December BetterBond Property Brief brings with it a bit of festive cheer; Economist, Dr Roelof Botha points out that during Q3 2024, the economy provided exceptionally good news with the creation of 294,000 new jobs, each one of which will be contributing to the broadening of the taxation base – thereby assisting National Treasury’s fiscal ability to upgrade and expand the country’s infrastructure.
The declining trend in home loan activity seems to have turned the corner, with the average number of home loan applications during October and November increasing by 11.5% (QOQ) and by an impressive 22.6% YOY.
The YOY rates of decline in deposits for home loans are impressive, namely 7.8% for all buyers and 10% for FTBs.
Gauteng and the Western Cape continue to dominate the residential property development market in South Africa, with the lion’s share of houses and flats that have been built during the first three quarters of the year. Gauteng leads the pack with a share of 43%, followed by the Western Cape at 32% and KwaZulu-Natal in third place with a share of 11%.
The month in numbers
- 22.6% YOY increase in the number of home loan applications in Q4
- 50 Basis points – reduction in the prime rate since September
- R1.28 million – Average home purchase price for first-time buyers
- 8.1% – Increase in average house price since Q4, 2019 (pre-Covid)
BetterBond index of home loan applications
The declining trend in home loan activity seems to have turned the corner, with the average number of home loan applications during October and November increasing by 11.5% (QOQ) and by an impressive 22.6% YOY.
It is particularly encouraging that the BetterBond home loan index was 5% higher during the first two months of Q4 2024 than Q4 2019, just before the sharp contraction induced by the Covid lockdowns. Following a sound recovery of home loan applications immediately after the lockdowns were lifted, the residential property market started feeling the pinch of a monetary policy approach with a singular focus on lowering inflation, despite the absence of any excess demand in the economy.
The downturn in the BetterBond index of home loan applications lasted nine quarters, stabilised during the first half of 2024 and then started picking up on the anticipation of an imminent relaxation of the monetary policy. The prospects for a further recovery have been boosted by two successive repo rate declines of 25 basis points each.
Average home purchase price
The drop in the prime lending rate of 25 basis points in November was not sufficient to create any significant upward momentum in house prices, but a measure of stability has been evident during October and November. The average house price for all buyers amounted to R1.57 million, virtually unchanged from the average price during Q3 2024.
The same trend occurred for first-time buyers (FTBs), with a marginal increase in the average house price of 0.5% to a level of R1.28 million. The YOY increases in house prices for all buyers remained below the latest rate of inflation, namely 2%. Although house prices are still lower in real terms than before the restrictive monetary policy kicked in, it is encouraging that the average purchase price has risen by 8.15 since Q4 2019 (pre-Covid). Interest rates are expected to drop further in 2025, which should provide some momentum to house price increases.
Average deposit for home purchase
The welcome lowering of the deposits required for access to home loans that occurred in Q3 2024 gained some traction during October and November, when the average amount required for all buyers dropped to below the R300,000 level for the first time since Q3 2023, with a QOQ decline of 3.8% for all buyers and a decline of 3.5% for FTBs.
The YOY rates of decline in deposits for home loans are more impressive, namely 7.8% for all buyers and 10% for FTBs. Unfortunately, prospective homebuyers are still faced with the negative effect of the high interest rates over the past three years. For FTBs, the average deposit remains 90% higher than three years ago and for all buyers it is still 54% higher. Any further interest rate declines will almost certainly narrow the ratio between deposits and home purchase prices, a prospect that is likely to materialise in 2025.
Value of residential buildings completed by province – Jan to Sep 2024
Gauteng and the Western Cape continue to dominate the residential property development market in South Africa, with the lion’s share of houses and flats that have been built during the first three quarters of the year. Gauteng leads the pack with a share of 43%, followed by the Western Cape at 32% and KwaZulu-Natal in third place with a share of 11%.
The presence of large manufacturing industries with diversified value chains constitutes one of the major reasons for high levels of property market activity in these provinces. They also house the country’s largest metros and offer a substantial variety of educational opportunities at primary, secondary and tertiary level. With a growing number of highly skilled people now being able to work remotely, however, other provinces could also witness a higher future level of demand for houses from people that prefer a less congested urban environment.
Read the full report here.
