Good news for first-time homebuyers in South Africa

South Africa’s property market is more favourable for first-time homebuyers now compared to a year ago, thanks to an increased transfer duty threshold and lower interest rates.

MyProperty Home Loans recently released its latest home loan statistics, comparing March 2024 to March 2025, which revealed significant shifts in the South African property market. 

Notably, the statistics showed that first-time buyers now constitute 72.71% of home loan applications, up from 71.34% the previous year, indicating a growing confidence among new entrants.​

The report acknowledged that the 2025 Budget presented in March created many pain points for South African households, including a 0.5 percentage point value-added tax hike.

However, the Budget also gave homebuyers the “gift” of increasing the transfer duty exemption threshold. 

In South Africa, transfer duty is a tax homeowners pay the South African Revenue Service when they buy property. This duty is based on the purchase price or market value, whichever is higher. 

There are also exemption thresholds, meaning buyers do not pay the transfer duty if the property’s value falls below a certain limit.

In the Budget Review, the National Treasury explained that the monetary thresholds for transfer duties will be adjusted by 10% to compensate for inflation. 

It specified that the transfer duty tax rates will remain unchanged, but the 10% adjustment increased the exemption threshold for transfer duty from R1.1 million to R1.21 million.

In addition to this higher exemption threshold, first-time homebuyers also enjoy a more favourable interest rate environment than a year ago.

Between March 2024 and March 2025, the Reserve Bank decreased interest rates three times, leading to a cumulative 75 basis point cut.

This saw the prime lending rate decrease from 11.75% to 11%, offering some relief to borrowers. 

“With the reduced interest rate and no transfer duty below R1.2 million, the market is more favourable for first-time buyers compared to a year ago,” MyProperty said.

The changes to transfer duty rates and bracket adjustments in the 2025 Budget can be seen in the table below.

South Africa’s property market set to boom

One drawback of the current environment is that the average purchase price for first-time buyers increased from R1.19 million to R1.22 million over this period.

The statistics further revealed that the average approved bond rose from R1.03 million to R1.57 million.

Despite these increases, the average deposit for all buyers rose substantially from R159,471 to R352,173. In addition, own bank bond acceptance rates improved slightly from 52.24% to 52.61%, indicating a more favourable lending environment.​

“These trends align with broader market observations. The average age of first-time buyers has increased to 39, reflecting a shift towards older individuals entering the market,” it said.

MyProperty Home Loans’ Michael-Anne Abrahams said the data reflects a resilient property market with first-time buyers leading the charge. 

“With improved lending conditions and increased consumer confidence, now is an opportune time for prospective homeowners to enter the market,” she said. 

Merchant West Investments’ portfolio manager and head of listed property, Ian Anderson, also recently pointed out that South Africa’s current property market is more favourable for investors than it was five years ago.

Specifically, he highlighted that South Africa’s real estate investment trusts (REIT) sector is significantly stronger and more resilient than in 2020.

Anderson pointed to improved fundamentals, healthier balance sheets, and better positioning to withstand global uncertainty and market volatility as reasons for this.

He explained that, even though global markets have been turbulent, South African real estate investors are in a good position at the moment. 

Between March 2017 and March 2020, and largely due to the Covid-19 pandemic, South African REITs lost an average of more than 70% of their value, Anderson said.

In the years since, the sector has clawed back nearly 68% in value, excluding dividends, though it remains more than 50% below March 2017 levels.

However, Anderson said large drawdowns from current levels are highly unlikely, mostly due to two reasons.

Firstly, South African REITs are trading at significant discounts to net asset value, unlike the premium conditions seen at the end of 2017.

Secondly, the sector has spent the post-pandemic years strengthening its balance sheets through lower payout ratios, strategic asset recycling, and timely equity capital raised.

This has brought loan-to-value ratios down across most of the sector, making it significantly healthier.

Anderson said that while economic growth may be sluggish or even turn negative, the context is vastly different from that of 2020.

“Economies remain open, tenants continue to trade, and rents are being paid. That’s a far cry from the conditions during April and May of 2020,” he said.