Property Brief - June 2023

In this edition of Property Brief, home loan applications have remained comparatively steady during the12 months to end-May 2023, and similar to levels seen in Q4 2022.Despite evidence that South Africa’s inflation rate has peaked and started a downward trajectory, the Reserve Bank raised the repo rate by another 50 basis points in May, the tenth rise in a row. South Africans will be hoping that the latest decline in the Consumer Price Index, to below 7%, will end the current rate-hiking cycle. This could pave the way for an uptick in the property market later this year and into 2024.

The decline in new home loan applications, in general, and for first-time buyers, in particular, should be seen against the backdrop of a 68% increase in the cost of servicing debt since November 2021 when the Reserve Bank commenced its current rate-hiking cycle. During this period, the prime interest rate, which determines so much of aspirant buyers’ home loan affordability, rose from 7% to 11.75% at present. A combination of substantial formal sector job creation during Q1 2023 and the new downward trend in the inflation rate, could herald relief for homebuyers and a consolidation in the property market over the coming months.

While average home prices have continued a steady rise in nominal terms, the values of approved home loans have dipped slightly since interest rates started rising in Nov 2021. The average home loan for first-time buyers has remained above R1 million, and for all buyers it has stayed above R1.3 million during the 12 months ending May 2023. While the decline applies to all buyers, it has been marginal.

For all buyers, the average home price continued to climb and was 3% higher, on average, during the first five months of 2023 than during Q1 2022.

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