After a quieter second quarter, there are signs that South Africa's residential property market is settling into a more stable phase, with home loan applications holding steady and affordability gradually improving, according to the leading mortgage originator BetterBond.
The company’s Home Loan Applications Index – a measure of home buying demand in the market - remained virtually unchanged during the first two months of the third quarter, following a marginal decline in Q2. This suggests, it says, that the slowdown in homebuying activity may have run its course, despite continued sensitivity to interest rates and the size of the deposit required by banks.
Importantly, the volume of home loan applications in Q3 was 11,3% higher than in Q4 of 2023, when the highest post-pandemic interest rates were hitting households hard.
Deposit requirements remain a major hurdle for many prospective buyers, but here too the longer-term picture is encouraging, says BetterBond. Although banks increased their deposit requirements during the first two months of Q3, the average deposit requirement is still 7,3% lower than it was two years ago, and for first-time buyers, the year-on-year increase was just 1,8%.
An improved lending environment is also reflected in approvals. The percentage of home loan applications being approved by the banks has reached 64,5%, having climbed steadily since interest rates started to come down two years ago.
House prices, meanwhile, are continuing to climb quite rapidly. According to BetterBond’s figures, first-time buyers are now paying an average of R1,4m, an 8% increase over the past year and a 19% nominal increase since Q3 2023.
The average purchase price for all buyers is now around R1,7m, although repeat buyers saw a marginal quarter-on-quarter decline in July and August.
At the end of Q3, the average national house price has risen 5,9% year on year, compared with just 1,2% in the previous 12 months. Breaking the market down regionally, the Western Cape continues to lead, with average house prices currently showing a 13,8% year on year increase, followed by Greater Pretoria at 11,5% and Mpumalanga in third place with an average house price of R1,67m.
For consumers, the overall message is therefore cautiously positive. The combination of steadily rising demand, lower deposits than two years ago, improving approval rates and firmer house-price growth suggests a well-balanced market where both sellers and buyers can benefit by taking action now.
