February 6 2025 23:30
A guest article by ooba, the bond originators
The announcement of a 25 basis point rate reduction marks an improvement for the residential property sector, lowering the repo and prime lending rates to 7.50% and 11.0%, respectively.
This news concludes the third rate cut in a period of less than six months, with the potential for rate cuts anticipated during the first half of 2025.
Rhys Dyer, CEO of the ooba Group, welcomed the news – and the potential of a cumulative 100 basis points rate cut before the end of 2025.
“The announcement by the South African Reserve Bank (SARB), coupled with the potential for further relief, will aid growing momentum in South Africa’s residential property sector,” said Dyer.
With economic activity still at subdued levels and headline inflation at just 3.0% in December last year, one can definitely make a strong case for further interest rate relief locally, but that the global economic outlook may dictate some changes in the months to come.
“The global economic and inflation outlook is rather uncertain, and the SARB may be reluctant to cut interest rates too hastily and run the risk of any reversal in the progress achieved thus far in containing price pressures,” he said.
In December 2024, following two interest rate cuts, ooba Home Loan’s statistics showed an increase in the average purchase price paid for property in the month to R1.67m, a healthy 6.5% year-on-year increase.
“The average purchase paid by first-time homebuyers also rose to R1.26m over the same period, marking a 6.7% increase,” said Dyer.
Motivated by attractive interest rates, coupled with favourable bank lending conditions, Dyer said that national demand for buy-to-let properties surged to a record 15.1% in December 2024, reaching a new record level, up from a previous high of 14.8% in December 2023.
“Last month’s buy-to-let figures were almost entirely attributable to a 10.8 percentage point increase in demand in the Western Cape, with 38.8% of all applications received attributed to buy-to-let properties,” he said.
First-time homebuyers benefited from the highest levels of loan-to-value (LTV) ratios seen in recent years at 90.4% in Q4’24 – compared to 88.4% a year ago.
“Our data shows that the banks continue to support homebuyers with 100% loans, despite the climate,” said Dyer.
As the largest housing market in the country, the Gauteng region has been privy to excess supply over demand and weak house price inflation (HPI) in recent years.
After 15 long months of falling prices from year earlier levels, June 2024 saw the turning of a corner in the Johannesburg housing market.
247@propertyflash.co.za
