Property Flash


May 9 2024 17:30

The quarter one 2024  home loan statistics from South Africa’s home loan comparison service, ooba Home Loans, have showed that while homebuying activity levels have slowed in a high interest rate environment, there are still indicators pointing to a residential property market poised for gradual recovery.

Rhys Dyer CEO of ooba said the prevailing ‘higher for longer’ interest rate environment affected ooba Home Loans’ application volumes for the quarter.

“In quarter one 2024, the volume of home loan applications processed was down 9% from quarter one 2023 and down 25% from the first quarter of 2022. However, we have seen an 8% increase in application volumes in quarter one 2024 against quarter four 2023, and there is definitely more activity in the market. Coupled with this, the uptick in property prices, first-time homebuyer deposit values and buy-to-let investments against the backdrop of steady bank approval rates are all positive trends,” he said.

The average price of properties originated through ooba trended upwards, with Dyer citing growth of 3.1% year-on-year across both the first-time and national property price categories.

Both segments grew 4.8% in the past quarter, with the current average national purchase price now sitting at R1 479 327 and at R1 171 798 for first-time homebuyers.

As much as 62% of the value of applications processed by ooba Home Loans fell within the greater than R1.5m purchase price band, a slight upward shift from quarter one 2023 where this segment represented 59% of application values. 

“Conversely, a downward shift in homebuying activity in quarter one 2024 in the price range below R1.5m was recorded, as evidenced by ooba Home Loans’ graph showcasing the home loan applications value by purchase price segment over the last five years,” Dyer said.

“Year-on-year, the Western Cape and Mpumalanga registered the highest growth in the price of houses originated by ooba Home Loans, showing a robust +9.4% and +9.5% respectively,” said Dyer. 

Increased property prices are not the result of demand outstripping supply, but can rather be attributed to the pipeline of affluent homebuyers purchasing properties in high-demand regions such as the Western Cape.

“Our latest statistics show that almost 60% of the value of applications processed in quarter one 2024 were from homebuyers who had a monthly income in excess of R83,300, compared with 43% in quarter four 2021, at the start of the rate hiking spree,” said Dyer.

“These homebuyers are less affected by the external economic pressures faced by consumers, and are seeing opportunities in the market,” he said. 

Average income earnings overshoot house price inflation

Nationally, the average gross income of home loan applicants processed during quarter one 2024 was higher than levels recorded a year prior. In all regions except Mpumalanga, the year-on-year increase in applicant income levels has exceeded the growth recorded in the average purchase price paid, reinforcing the dominance of more affluent homebuyers in the last quarter.

This trend is most pronounced in the Free State, where the average price paid for a home increased just 3.2% year-on-year, in contrast to 24.1% year-on-year growth in the average gross income of applicants in this region over the same period.

Investors continue to cash in

The rise of buy-to-let investors continues, with a growing number of homebuyers purchasing properties with the intention of letting them in return for rental income.

As much as 13% of ooba Home Loan’s application volumes nationally are for buy-to-ley proeperties, up from 8% in quarter one 2023.

“The driving force behind the national rebound is undoubtedly still the Western Cape, with applications for investment properties rising to 31.1% of the total in early-2024, while in the Eastern Cape investment demand has more recently begun to climb, rising to robust 16.2% in quarter one 2024,” said Dyer.

Interestingly, the Eastern Cape is the only region registering demand for holiday homes well above the national average, at 2% of applications compared with 0.24% nationally.

First-time buying activity remains subdued

From the first-time homebuying frenzy in May 2020 when interest rates plummeted to 7%, during which this segment accounted for a record 56% of ooba Home Loans’ applications, to a low of 46% in quarter one 2024, indicated that the first-time homebuyers segment was sensitive to interest rates in tough economic conditions.

“An increasing percentage of first-time homebuyers are making the financially savvy choice of saving for a deposit,” said Dyer. 

“As much as 47% of our quarter one 2024 applications from this market segment secured their purchase with a deposit, in comparison to 43% of first-time homebuyers in quarter 2023.”

The average deposit from new homebuyers rose to 10.9% of the purchase price, up from quarter one 2023’s 9.7% and still significantly higher than the average deposit of 7.3%, recorded across all applications processed by ooba Home Loans in quarter one 2024.

“A bigger deposit helps to reduce your home loan term and/ or your monthly home loan repayments. It’s also a great way to secure the best possible interest rate and show both the banks and sellers that you’re a serious homebuyer,” said Dyer.

Bank approval rates are steady at 83.4% of applications processed in quarter one 2024, for ooba Home Loans customers.

“This is an indication that the banks’ lending appetites are still robust and that buyers’ financial standing has stabilised in the last year, considering that rates have remained unchanged since May 2023,” said Dyer.

Lenders are easing pressure on homebuyers by offering discounts to prime, with the average weighted rate of concession now at -0.52%, seven basis points cheaper than quarter one 2023, a relief in a time of high interest rates and higher monthly instalments.

“The residential property market is on the precipice of better times and the market is ready for a shakeup after a few trying years,” Dyer believed.

“The expected rate cuts later this year combined with elevated bank approval rates and competitive property prices make right now the perfect time to get a foot on the property ladder,” he said.

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