The latest statistics from leading mortgage originator BetterBond indicate that the property market is well on its way to full recovery, thanks to multiple interest rate cuts since late last year and other factors that have substantially increased the affordability of housing and the ability of prospective buyers to qualify for home loans.
The figures show that while the number of home loan applications fell off slightly in the second quarter of this year (quite possibly due to winter weather and a high number of public holidays), they were still 13,6% up on the second quarter of 2024, with prospective buyers being encouraged by a number of positive factors.
These include the fact that real (after inflation) house prices are currently still 6,4% and 8,3% lower for first-time buyers and all buyers, respectively, than at the start of 2022 – except in the Western Cape, where price growth has exceeded inflation for the past few years.
In nominal terms, the national average price for first-time buyers also declined slightly from R1,3m in Q1 to R1,28m in Q2, while the national average price paid by all buyers fell from R1,6m to R1,58m.
In addition, debt service costs as a percentage of household income are now finally moving in the right direction. They have declined from a high of 9,1% last year to 8,9% currently and are expected to drop even more as the effects of lower interest rates and rising salaries and wages continue to filter through into household budgets.
The prime rate has now declined from 11,25% to 10,5% and the latest Take-Home Pay Index released by BankservAfrica shows that SA’s nominal average take-home pay was R17 310 in June, notably above the R15 514 recorded in June last year.
The rate of inflation has also declined sharply since last year and the BankservAfrica report says this has also had a positive impact on the purchasing power of salary earners, resulting in a year-on-year increase of 2,8% in overall consumption expenditure and a 4,3% increase in the value of retail sales in the first half of this year.
Meanwhile, the banks are helping to sustain and strengthen property demand now by lowering the average deposit requirements for home loan approval. According to BetterBond, these are now 17% lower for first-time buyers and 11% lower across the board than at this time last year. The national average deposit required is now R272 000, while first-time buyers require an average R165 000.
However, the recovery remains fragile, and at risk due to a deterioration in the general economic environment, a decline in SA’s growth prospects and potentially lower levels of investment and job creation. Home sellers should thus continue to price conservatively and work with skilled and experienced property professionals to ensure successful transactions.
