The latest oobarometer shows the average purchase price in South Africa dropped to R1,411,434 in Q4 2023 – down 0.8% and 0.9% from Q4 2022 and Q3 2023, respectively.
Encouragingly, the average approved bond increased by 1.2% from Q3 2023 to R1,301,395, but the average deposit dropped by 9.3% year-on-year to R110,039 or 7.8% of the average purchase price, Ooba Home Loan’s data showed.
According to Rhys Dyer, CEO of ooba Group, the first-time homebuyer segment is re-emerging as a key driver of home loan market growth.
First-time homebuyers accounted for 48% of ooba Home Loan’s application volumes in both Q3 and Q4 2023, down by 1% on the 49% recorded in Q4 2022.
“This remains considerably lower than the peak of 56% recorded in May 2020 when interest rates tumbled to a historical low of 7%,” said Dyer.
In this category, both the average purchase price - now at R1 118 028 – up +0.4% from R1 113 157 in Q4 2022 - and the average deposit size (now at R121 774 up from R98 037 in Q4 2022) are trending upwards.
“This tells us that first-time homebuyers – now at an average age of 36 – may be taking longer to enter the property market because they are in fact taking some extra time to save up for a decent deposit, said Dyer.
Banks still lending
The cooling of bank approval rates from 84.4% in Q4 2022 to 81.6% in Q4 2023 is a clear indicator of the financial stress and resultant affordability challenges that the average homebuyer is under in a high interest rate environment, said Dyer.
“However, what is encouraging to see is that bank approval rates have only dropped by just under 2% from the 83.5% that ooba Home Loans was securing for our homebuyers at the start of the rate hike cycle in Q4 2021,” he said.
A competitive and improved average –interest rate offered by banks, now at -0.48% below prime (4 basis points lower than in Q3’23) however, sends a good signal to the market.
“It indicates confidence by the banks and an ongoing appetite to compete for home loan market share. Here, the banks are looking to attract new-to-bank customers with additional rate concessions, and we expect this strategy to prevail throughout 2024," said Dyer.
Looking ahead, despite the upheaval over the past two years, Dyer believes that next quarter’s statistics should start to paint a more positive picture of what’s to come.
“We anticipate an interest rate cut from as early as March 2024, but more likely May 2024, followed by further rate cuts during the course of 2024.”
“As a result, consumer confidence will start to rise, especially among first-time homebuyers. We in fact anticipate that first-time homebuyers will once again account for more than 52% of bonded property transactions in the last quarter of this year. We also anticipate that our home loan approval rate will increase to more than 83% for 2024,” he said.
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