BetterBond
The February BetterBond Property Brief shows that January witnessed a further stabilisation of home loan activity, which seems to have turned the corner ever since interest rates started to decline. Although the number of home loan applications during the first month of the year was on par with the average for Q4 2024, it was 7.5% higher than in the same month last year.
Further underscoring a market turnaround, a comparison between the percentage change in the number of home loans granted for the 12-month periods ending January 2024 and January 2025 confirms the extent of the turnaround in the residential property market.
The month in numbers
- 7.5% YOY increase in the number of home loan applications
- 4.1% YOY increase in average house prices
- R1.58 million average home purchase price
- 8.7% YOY increase in homebuyer income
BetterBond index of home loan applications
The BetterBond home loan index was 1.3% higher in January 2025 than two years earlier. The latest decline in the Reserve Bank’s repo rate has now lowered the prime lending rate to 11%. Although this is still 100 basis points higher than in January 2020 (prior to the Covid pandemic), substantial leeway exists for further interest rate declines. The residential property market is well poised to start a new, sustained growth phase during the first half of 2025.
Average home purchase price
The latest decline in the prime overdraft rate of 25 basis points occurred towards the end of January and its impact on average home prices will only be visible in February and March. The average home purchase price in January of R1.58 million was nevertheless unchanged from the average price recorded during Q4 2024.
Significantly, it was 4.1% higher than in January 2024, which embodies a real increase of more than 1% (after adjustment for inflation). First-time homebuyers have experienced a steeper increase in average home prices, with the average price of R1.34 million in January 7.3% higher than a year earlier and 4.3% higher than the average for Q4 2024. There is little doubt that pent-up demand for home ownership exists at the more affordable segments of the market and the latest interest rate cut should provide further impetus to average home prices in the months ahead.
Average deposit for home purchase
Unfortunately, the lowering of the deposits required for access to home loans that occurred in Q3 2024 has not been sustained, with fairly sharp increases recorded during January 2025. Fist-time buyers have been particularly disadvantaged, with the average deposit for January representing an increase of 29% over the same month in 2024 and a 33% increase over the average deposit during Q4 2024.
Apart from the lingering negative effects on household finances emanating from a three-year period of record high interest rates, banks have also been obliged to adopt a more conservative stance towards credit provision due to rising levels of credit impairments. During last year, total bad debts of the banking sector rose to above R200 billion per quarter. Although South Africa is in a rate-cutting cycle, this needs to be pursued in haste to provide more spending power for indebted households.
Key residential property market metrics confirm recovery
An analysis of a number of key indicators of residential property market activity captured by BetterBond provides ample evidence that the market has turned the corner. Following the fairly sharp contraction that occurred during 2023, last year saw an improvement of virtually all of the key indicators, although these improvements were not evenly spread on a geographical basis.
The most significant improvement is the return to positive growth for the number of home loans granted, which has staged a remarkable recovery from the sharp drop in 2023, induced by restrictive monetary policy and, as an inference, an increase of 36% in the debt servicing costs of households. Fortunately, a rise in homebuyer incomes of 8.7% has played a key role in stabilising the homebuying market.
Read the full report here.
