Against a much improved economic backdrop, the latest data from leading mortgage originator BetterBond shows that the residential property market is steadily finding its feet again. Home loan application volumes are still 18.6% below the post-Covid peak reached in Q1 2021 but have recovered by 30% since bottoming out in Q4 2023, .
This reflects a growing increase in demand that is being fuelled by lower deposit requirements and higher wages. The average deposit required by all buyers is currently 6% lower than it was a year ago, but conditions are even more favourable for first-time buyers, with the average deposit required now down by a whopping 21% year-on-year.
Meanwhile, the BetterBond figures show that the incomes of most homebuyers have increased at a rate greater than inflation over the past four years, with those aged 51 to 60 seeing the highest rate of increase of around 35% between 2021 and 2023, and those aged 41 to 50 seeing the next highest rate of 22% between 2023 and 2025. The average rate of increase has fallen from 14,2% in 2021 to 8% currently, but is still well clear of the inflation rate.
These factors have substantially improved the affordability of home purchasing, with the income to house price ratio now standing at 38,8% for buyers in the lowest earning group, and 57% for those in the highest earning group.
And that, in turn, has increased the percentage of home loan applications that are approved. Grants to first-time buyers, for example, are up 17,4% year-on-year.
Nevertheless, sellers should note that home prices in most parts of the country are still not showing any real growth, says BetterBond. It calculates that the average house price for all buyers has increased by a nominal 7% since Q2 2023, but actually declined by 2,1% in real terms due to the impact of inflation. When it comes to first-time buyers, the average house price paid has declined, in real terms, by 4,5% since Q2 2023, when the prime interest rate had shot up by 425 basis points over a very short period.
In October, the average nominal home purchase price for all buyers remained static at just over R1,6m, while that for first-time buyers fell 3% year-on-year to R1,27m.
Under these circumstances, most home sellers are very willing to negotiate, especially if they are in a hurry to move, making it an even better option than usual to buy a pre-owned home now than to build one from scratch. Building costs vary from region to region and also depend on the size of the home and the type of finishes required, but a new build usually costs at least 20 to 30% more than a pre-owned home of similar size. And that could make all the difference to the size of home you can afford, or even between becoming a homeowner or not.
