Bad news for South African homeowners
The South African residential property market remains under pressure, with a lack of buying activity and new building plans weighing on valuations.
Furthermore, with elevated interest rates, many homeowners are struggling to make the repayments on their home loans.
The latest Altron FinTech Household Resilience Index outlined how much pressure high interest rates are putting on households.
The Reserve Bank is well into its cutting cycle, having kicked it off with a 25 basis point cut in September, followed by another reduction in November.
Economists’ consensus is that another cut will be made in January, which should bring further relief to households and homeowners.
These interest rate cuts should also boost activity within the residential property market. However, economist Dr Roelof Botha said it will take some time before the market fully recovers.
Interest rates rose a cumulative 475 basis points to a 15-year high during the Reserve Bank’s hiking cycle and were maintained at this elevated level for a full year.
So far, the cutting cycle has brought this cumulative increase down to 425 basis points compared to the mid-pandemic low.
As a result, interest rates are still significantly higher and are expected to settle at a higher level than they were pre-pandemic.
Botha explained that record-high interest rates have severely damaged South Africa’s residential property market.
For example, the value of building plans has declined by 20% in real terms over the past three years.
Predictably, the BetterBond Home Loan Index shows a pronounced inverse relationship with the prime overdraft rate.
This index confirms the negligible negative effect of the Covid lockdowns, with a sharp recovery in home loan applications having occurred within one quarter.
This strong bounceback was also fuelled by the extremely low interest rates at the time, as the Reserve Bank slashed the repo rate to stimulate the local economy.
In sharp contrast, Botha said the restrictive monetary policy that took effect in 2022 took the wind out of the residential property market’s sails.
The fourth quarter BetterBond Home Loan Index is still 28% lower than in the first quarter of 2022. Unless interest rates decline to pre-Covid levels or lower, the prospects remain dim for a new, sustained growth phase in the housing market.
This is shown in the graph below, courtesy of Botha and Altron.

Data from the Reserve Bank itself shows that households in South Africa are under immense financial strain, with debt as a share of disposable income rising.
The increased debt burden also comes with increased debt-servicing costs, which now account for just less than 10% of household disposable income.
The problem is only set to get worse as credit card growth remains strong as consumers turn to debt to maintain their lifestyles amid rising prices.
In its latest Quarterly Bulletin, the Reserve Bank revealed that nearly all credit categories extended to households increased in the third quarter of 2024.
This took household debt as a share of disposable income to 62.2%, up marginally from 62.1% in the previous quarter.
Households’ cost of servicing debt relative to disposable income remained broadly unchanged at 9.1% in the third quarter of 2024.
In addition to the rise in household debt burdens, debt-servicing costs have also risen due to higher interest rates.
This pressure is expected to last for some time as there is a significant delay between changes to interest rates and the impact felt by households, with the lag period typically around six months.
Thus, debt-servicing costs for products such as home and car loans remained low throughout 2021 and the beginning of 2022.
Since then, these costs have skyrocketed, eating up an ever-larger chunk of household disposable income. For example, the monthly repayments on a R1.5 million home loan have risen by R4,600 in two years.
The same lag applies when interest rates are cut – the relief is not immediate. Thus, debt-servicing costs are expected to remain elevated.

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