Big blow to South Africa’s property market

The South African Reserve Bank has decided to keep the repo rate at 7.50%, a move which has been met with disappointment as many potential homebuyers and homeowners continue to struggle with affordability.

Although South Africa’s property market has shown signs of recovery recently, growth has been sluggish and still lags pre-pandemic levels.

National Head of Sales at BetterBond Bradd Bendall explained on Kaya Biz that year on year, intake in the property market is up between 17% and 19%.

“We’re certainly seeing a renewed interest in the property market. But one must bear in mind we’re coming off a fairly low base last year after an extended high interest rate cycle,” Bendall said.

The first two interest rate cuts certainly assisted with affordability and have pushed first-time homebuyers back into the market.

Currently, this group represents more than 50% of BetterBond’s applications, Bendall explained.

“We’re certainly seeing the assistance of some stimulus in the market, but in truth, the economists say we should be trading around 10% to 10.25%, and we’re still at 11%, so there’s still some way to go to really give the market a bolster,” he said.

Every interest rate cut assists the buyer, but when interest rates hold steady – like what happened in March – “it just creates this sort of angst that we were hoping we wouldn’t see”.

“We’ll see how this plays out, but it’s certainly better than an increase.”

However, even with recent rate cuts, the property market is still down compared to 2019.

Bendall explained that the market saw an uptick in 2022, but that was only a result of the pent-up demand after the Covid-19 pandemic, which doesn’t make it a useful metric for comparison.

“We’re still below those 2019 numbers, so we certainly haven’t seen a run in terms of property purchasing.”

“It’s certainly better than it was two years ago, but again, it’s also a low base.”

Affordability impacting first-time buyers

Although new homebuyers are entering the market, this, in itself, doesn’t mean the property market has made a recovery.

Since these buyers are just entering the market, they do not necessarily know how poor it really is, as they have nothing to compare it to.

This group is also facing a number of challenges which make it more difficult to buy property.

Beyond interest rates, the cost of living is also much greater than it was a decade ago. That makes it much more challenging for first-time buyers to save for a deposit, transfer costs and transfer duty.

As such, the average age of first-time homebuyers has also been increasing, going from 34 to 37 in the last six years. “That’s a massive shift,” Bendall said.

He noted that a number of fronts need to improve first, including food prices, fuel prices, the cost of living, and electricity prices, which will increase by 12.74% effective 1 April 2025.

“There’s a number of factors at play, and all of them contribute to affordability or a lack of affordability.”

“We need all of these to align, and hopefully, sometime they will. But to be honest, it’s all out of our control. We have to play what’s in front of us.”

Fortunately, he said that South Africa’s investor market is still strong.

“Investors see opportunity in this current market, and they’re certainly taking that up. You’re seeing micro apartment blocks being erected all over the country, and investors are coming in quite heavily there.”

Developments have also started coming back in the second quarter of last year, particularly in the Western Cape and up the north coast of KwaZulu-Natal.

However, there hasn’t been a run like there was after the pandemic or pre-2020.