What first-time homebuyers can afford in Cape Town, Joburg and Durban

·5 May 2024

First-time homebuying activity in South Africa has dropped, with many would-be buyers deciding to save for a deposit.

According to ooba Home Loans, homebuying activity levels in Q1 2024 slowed in the current 15-year interest rate environment.

That said, against all odds, the average price of properties originated through ooba trended upwards, with growth of 3.1% year-on-year across both the first-time and national property price categories.

Both segments saw growth of 4.8% from Q4 2023, with the current average national purchase price now sitting at R1,479,327 and at R1,171,798 for first-time homebuyers.

Rhys Dyer, CEO of ooba Group, said that 62% of the applications processed in Q1 2024 fell within the greater than R1.5 million purchase price band – an upward shift from the 59% in Q1 2023.

“Conversely, a downward shift in homebuying activity in Q1 2024 in the price range below R1.5 million was recorded.”

First-time home buying has slowed from the 56% of ooba Home Loans’ applications in May 2020 to a low of 46% in Q1 2024.

Following the drop in interest rates to 7% during Covid-19, the first-time homebuying market experienced a frenzy.

However, the first-time homebuyers segment remains sensitive to the 15-year high interest rates in Q1 2024 (prime at 11.75%).

“We have seen a further 3% year-on-year contraction in activity from this market segment,” said Dyer.

“This is a clear indicator that prospective homebuyers are choosing to delay the purchase of their first property until rates begin to drop and inflationary pressures are reduced.”

That said, many of these would-be buyers are now accumulating savings to finance a greater portion of their purchase, seeing the long-term financial benefit of putting down a deposit.

A bigger deposit reduces the monthly home loan repayments and/or the home loan term.

“An increasing percentage of first-time homebuyers are making the financially savvy choice of saving for a deposit,” said Dyer.

“47% of our Q1 2024 applications from this market segment secured their purchase with a deposit, in comparison to 43% of first-time homebuyers in Q1 2023.”

“The average deposit from new homebuyers rose to 10.9% of the purchase price, up from Q1 2023’s 9.7% and significantly higher from the average deposit of 7.3% recorded across all applications processed by ooba Home Loans in Q1 2024.”

Properties available at roughly the average purchase price for first-time homebuyers in South Africa can be found below: