Property Brief - November 2023

In this edition of Property Brief, new home loan applications started Q4 2023 with a positive 7.6% QOQ increase. The YOY increase was more muted at 2%, but nonetheless signals some stability returning, and the resilience of the residential property market. This follows the steep drop in activity since the SA Reserve Bank embarked on its restrictive monetary policy stance in November 2021. Compared to Q4 2021, the number of new home loan applications is down 18%. Prospective homebuyers will be hoping for lower interest rates in 2024.

More proof of the resilience of the residential property market is evident in the solid 5.4% YOY increase in average home purchase prices (figure 2). For first-time buyers, this number is 4.1%. QOQ there was also growth, while the average home price has increased by 10% since Q4 2021. This trend is especially encouraging when viewed against a backdrop of declining home price trends in Q3 2023 and is in line with recent increases in home loan applications. A further recovery of the demand for residential property is on the cards when interest rates start coming down.

During the 12 months to October 2023, the Western Cape has consolidated its position as top-priced region for residential properties. It came within a whisker of breaching the R2 million mark for average home prices and increased the gap to the second-placed BetterBond region of Greater Pretoria. The average price of a home in the Western Cape is now 25% higher than in Pretoria, 56% higher than in Johannesburg South East and 75% higher than in the Eastern Cape.

The upward trend in the ratio of home price to buyers’ annual income was stopped in its tracks by the SA Reserve Bank’s hawkish monetary policy commencing in November 2021. When considering the relative stability of average home prices – despite higher interest rates – it is clear that household incomes have also been under pressure on a wider front, due to increases in inflation and the cost of servicing debt. Fortunately, the Consumer Price Index (CPI) is now comfortably within the Reserve Bank target range, which may soon spell the end of the current rate-hiking cycle.

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