4 property trends to watch right now

 ·26 Nov 2022

Recent data from property group Ooba shows that there are significant shifts within the residential property market in light of South Africa’s unique economic outlook.

Statistics provided by the group for the third quarter of 2022 revealed that competition for home loans remains vigorous among home loan lenders, despite the ongoing interest rate hikes and rising costs which place further pressure on consumers.

Rhys Dyer, the CEO of Ooba Group, said that year-on-year property price growth in most provinces has slowed to rates well below inflation, and this should, in turn, improve the affordability of property as wages grow quicker than property prices.

This, coupled with the banks’ willingness to continue to approve home loans at attractive terms, makes investing in residential property an attractive proposition – especially for first-time homebuyers, Dyer added.

Houses are getting more expensive

Ooba reported that the average purchase price of a home has increased when compared to the year before.

In Q3 2021, the national average purchase price sat at R1,370,000, while this has subsequently increased by 2% to R1,402,400.

The group noted that the majority (58%) of the approved bonds processed by Ooba over the third quarter were for properties of R1.5 million or upwards – this was up 1% from Q3 2021 and a significant 9% from Q1 2020.

“The work-from-home phenomenon coupled with historically low-interest rates throughout the pandemic saw many ‘scaling up’ as home loan repayments became more affordable,” said Dyer.

According to Ooba, properties ranging from R759,000 to below R1.5 million made up 31% of instructed bonds – down by 2% from Q3 2021 and 4% from Q3 2020.

Properties below R750,000 went on to account for 11% of the instructed bonds dealt with by Ooba. Dyer said: “This indicates a shift in home buying trends in this property price segment post-COVID-19 pandemic.”

Deposits are getting bigger

Ooba reported that, on average, the size of deposits put down by homebuyers over the third quarter of this year had grown at a rate of 18.2% when compared to last year.

The average deposit as a percentage of the purchase price in Q3 was 7.7% and is now 9.1% in Q3 2022.

“Bigger deposits are a sign of savvy financial decision-making by homebuyers. A larger deposit is likely to secure the best possible interest rate and is often required to ensure homebuyers can cover their monthly bond repayments under higher levels of interest,” said Dyer.

Fewer homebuyers can qualify for home loans 

Fewer homebuyers can meet affordability requirements on a 100% loan and need put down deposits to qualify for the home loan, said Dyer.

Ooba reported that approval rates for 100% loan applications remained elevated at 84.1% in September 2022; however, demand for 100% loans decreased from 60.8% in August 2022 to 56.6% in September 2022.

More people are renting

Dyer said that investment and buy-to-let properties had seen a sharp uptick – recording year-on-year growth of almost 30% in Q3 ’22.

“This figure is indicative of the demand for property rentals as rising interest rates put the dream of homeownership on hold for the time being,” he added.

In terms of what is in store for the residential market, Dyer said that he expects market volumes to continue to decline in the short term, largely due to additional interest rate increases set to take place in November 2022 and Q1 2023.

“However, as demand slows, the supply of property increases and prices adjust, with a correlating decline in property price inflation. This sets the stage for a more active market.”

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