Change on the horizon for Property Market in South Africa
The South African residential property market sector is currently struggling but is ready for a gradual recovery.
The Q1 '24 Oobarometer indicates that the high interest rates have impacted Ooba Home Loans' application volumes. This means that fewer people applied for Ooba Home Loans during this quarter.
However, resilient South Africans will likely be rewarded by predicted rate cuts towards the end of 2024.
In Q1 ‘24, the volume of home loan applications processed were down by 9% from Q1 ‘23 and down 25% from Q1 ‘22.
However, we saw an 8% increase in application volumes in Q1 ‘24 compared to Q4 ‘23, and there is definitely more activity in the market.
The average price of homes sold through Ooba increased by 3.1% compared to last year. This increase applies to both first-time buyers and national property prices.
Both segments experienced a 4.8% growth in the last quarter. The current national average purchase price is R1,479,327, while for first-time homebuyers it is R1,171,798.
In the first quarter of 2024, 62% of Ooba Home Loans processed applications for homes priced over R1.5 million. This is up from 59% in the first quarter of 2023. This is an increase from 59% in the first quarter of 2023."
There was a decrease in homebuying activity in the first quarter of 2024 for homes priced below R1.5 million. This information was shown in a graph by ooba Home Loans. The graph displays the number of home loan applications based on purchase price over the past five years.
There was a decrease in homebuying activity in the first quarter of 2024 for homes priced below R1.5 million. This information was shown in a graph by Ooba Home Loans. The graph displays the number of home loan applications based on purchase price over the past five years.
Moreover, despite economic fluctuations, bank approval rates remain steady at 83.4% of applications processed in Q1 ’24
Banks are still willing to lend money. Buyers' financial situations have improved in the past year. Interest rates have not changed since May 2023.
The data shows that home loan applications are not as financially stretched as expected.
The percentage of instalments increased from 18.7% to 19.4% between November 2021 and Q1 2024. However, this is still lower than the industry standard of 30%.
It is also heartening to note that the proportion of Ooba Home Loans applications rejected by one bank but accepted by another is on an upward trend (increasing by 2.8% quarter-on-quarter). This clearly underscores the vital function that bond originators play for homebuyers by procuring financing alternatives from various banks.
Lenders in the country are making it easier for homebuyers by offering discounts on prime rates. The average discount rate is now at -0.52%, which is 7 basis points lower than in Q1 '23. This is good news for buyers dealing with high interest rates.
Banks are trying to get more customers by making it easier to get a home loan. They are offering better deals and discounts to attract more people.
This helps make things more affordable, as banks are still giving discounts to new customers.
What the future holds
The housing market is about to improve and change after a tough few years. The longer term view is that rates are about to start declining leading to a better quality of life for home owners in the long term as we enter a new cycle.
Now is a great time to buy a property. Interest rates are expected to go down in the property sector. Banks are approving real estate loans at high rates. Property prices are competitive.
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