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Pillars of Justice

Stepping into Better Times: Insights into South Africa's Property Market

The residential property market in South Africa has faced challenges, but signs of a gradual recovery are emerging.

In the first quarter of 2024, the oobarometer reveals a decline in application volumes for ooba Home Loans due to the sustained higher interest rate environment. However, there's optimism as Rhys Dyer, CEO of the ooba Group, anticipates potential rate cuts by the end of the year, which could stimulate the market.

Compared to previous years, there's been a decrease in home loan applications processed, down by 9% from Q1 '23 and 25% from Q1 '22. Nevertheless, there's a notable 8% increase in application volumes compared to the last quarter of 2023, indicating increased activity in the market.

Despite the challenges, there's a positive trend in property prices. The average price of properties originated through ooba has seen a 3.1% year-on-year increase across both first-time and national property categories. Notably, both segments experienced growth of 4.8% in the last quarter.

In Q1 '24, 62% of the value of applications processed by ooba Home Loans was for purchases above R1.5 million, marking an upward shift from the previous year. Conversely, there's been a decline in homebuying activity for properties below R1.5 million.

Bank approval rates remain stable at 83.4% of applications processed in Q1 '24, indicating consistent lending appetites and stabilized financial standing among buyers.

While there has been a slight increase in instalments as a percentage, it remains comfortably below the industry benchmark of 30%. Additionally, there's a notable trend of applications declined by one bank but approved by another, showcasing the importance of bond originators in sourcing financing options.

Banks are easing pressure on homebuyers by offering attractive discounts on prime rates, with the average weighted rate of concession now at -0.52%, making finance more accessible amid high interest rates.

Looking ahead, Dyer expresses optimism for the residential property market, citing expected rate cuts, elevated bank approval rates, and competitive property prices as factors conducive to entering the property market.

With the prospect of better times ahead, now is an opportune moment to consider stepping onto the property ladder.

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