First-time home buyers have experienced a steeper increase in average home prices, with the average price of R1.34 million in January 7.3% this year being higher than a year earlier and 4.3% higher than the average for Q4 2024.
This is according to this month’s BetterBond Property Brief.
Bradd Bendall, BetterBond's international head of sales said the average home purchase price in January of R1.58m was nevertheless unchanged from the average price recorded during the last quarter of 2024.
“Significantly, it was 4.1% higher than in January 2024, which embodies a real increase of more than 1% (after adjustment for inflation),” says Bendall.
Dr Roelof Botha, an economist affiliated with the Gordon Institute of Business Science (GIBS), and advisor to the Optimum Investment Group and Currencies Direct said two events have however overshadowed January’s property market news.
He said the first was the welcome lowering in the repo rate by 25 basis points, the third cut since September 2024, which translates into a prime rate of 11%.
He said the second was the signing into law of the new Expropriation Act, which has caused a furore that has even evoked the (apparent) wrath of US President Donald Trump.
“Although some concern will remain over the implications of this update of the 1975 Expropriation Act, it is important to note that one of its main objectives is to prevent unnecessary delays with public works programmes.
“... its provisions are subject to section 25 of the Constitution, which has not been amended. ...
“Expropriation can only be used as a last resort, when all other attempts to purchase property in question have failed and jurisprudence regarding the interpretation of the concepts of just and equitable compensation will only develop after substantial litigation has occurred and may take decades,” Botha said.
He added that for now, property ownership in South Africa is secure and protected by a democratic Constitution that enshrines free enterprise principles. “The bottom line is ‘business as usual’.”
Nondumiso Ncapai, the managing executive at Absa Home Loans said at the bank, they offered up to 108% financing for first-time buyers while the government offers support through the First Home Finance programme.
“Initiatives such as these help reduce some of the barriers to entry faced by this market segment but further efforts to reduce the rate of inflation growth are needed to ease the burden on first-time home buyers,” Ncapai said.
She added that buyers in this market segment also tend to prioritise secure complexes and estates offering amenities like backup power, Fibre internet, and water security.
“Greater support for property developers and collaborations with banks and government would assist in providing environmentally sustainable homes for this market at more affordable prices.”
According to the BetterBond property brief, there is little doubt that pent-up demand for home ownership exists at the more affordable segments of the market and the latest interest rate cut should provide further impetus to average home prices in the months ahead.
The brief showed that unfortunately, the lowering of the deposits required for access to home loans that occurred in the third quarter of 2024 has not been sustained, with fairly sharp increases recorded during January this year.
It said that this meant that first-time buyers have been particularly disadvantaged, with the average deposit for January representing an increase of 29% over the same month in 2024 and a 33% increase over the average deposit during the last quarter of 2024.
“Apart from the lingering negative effects on household finances emanating from a three-year period of record high interest rates, banks have also been obliged to adopt a more conservative stance towards credit provision due to rising levels of credit impairments.
“During last year, total bad debts of the banking sector rose to above R200 billion per quarter. Although South Africa is in a rate-cutting cycle, this needs to be pursued in haste to provide more spending power for indebted households,” reads the brief.
The BetterBond index of home loan applications showed that January witnessed a further stabilisation of home loan activity, which seems to have turned the corner ever since interest rates started to decline.
Although the number of home loan applications during the first month of the year was said to be on par with the average for the last quarter of 2024, it was 7.5% higher than in the same month last year.
“This is a significant upward trend which eliminates seasonal influences. It is also encouraging that the BetterBond home loan index was 1.3% higher in January 2025 than two years earlier. The latest decline in the Reserve Bank’s repo rate has now lowered the prime lending rate to 11%. Although this is still 100 basis points higher than in January 2020 (prior to the Covid pandemic), substantial leeway exists for further interest ratedeclines.
“The residential property market is well poised to start a new, sustained growth phase during the first half of 2025.”
PROPERTY