South Africa’s residential property market is showing clear signs of renewed momentum, with home loan application volumes rising by 7.4% year-on-year for the 12 months ending May 2025.

The latest data from the BetterBond index reveals that application growth is now outpacing inflation – which stood at 2.8% in May – indicating a rebound in buyer confidence.

Although overall application volumes remain 28% below the highs seen in 2021, the index is now 4.5% higher than two years ago, reinforcing the view that the market is stabilising after an extended period of monetary tightening.

With inflation now below the South African Reserve Bank’s target range, economists are increasingly optimistic about a potential interest rate cut at the end of July – a move that could further support property market recovery.

The average home purchase price has declined across the board, with first-time buyers (FTBs) seeing the biggest benefit. The average price for FTBs fell to R1.28 million in Q2 2025, while the average across all buyers dropped to R1.58 million.

The average deposit required for home purchases has also fallen meaningfully. In Q2 2025, average deposits declined 11% year-on-year for all buyers and 17% for first-time buyers (FTBs).

After exceeding R300,000 in late 2023, the average deposit has dropped to R272,000 – and to R165,000 for FTBs, down from nearly R200,000 a year ago.

This trend, coupled with a slight decline in credit impairments (now at 2.5% of total bank assets), suggests effective credit risk management and improving affordability in the housing market.

The regional composition of home loans granted showed a strong 13.6% year-on-year increase. Johannesburg’s South-Eastern suburbs topped the list, while Greater Pretoria posted an impressive 26.7% jump – attributed to its vibrant university and manufacturing base.

The Western Cape also continued its upward trajectory, with loan activity up 14.7%.

Only the Eastern Cape and Mpumalanga recorded a decline in home loans granted, while the North West and Johannesburg’s North-Western suburbs underperformed relative to the national average.

The affordability ratio – average home price relative to annual income – has improved since peaking in 2021. For younger buyers (aged 21–30), the ratio declined from 3.2 to 2.6 years of income.

Despite this, market activity remains below pre-COVID levels, partly due to elevated lending rates and high deposit requirements, which have kept some buyers on the sidelines awaiting further rate cuts.

Building activity has been uneven across provinces. KwaZulu-Natal led with a 53.6% year-on-year increase in residential building completions (January–April 2025), while the Eastern Cape lagged with a 46.5% decline.

The Western Cape continued to benefit from the “semigration” trend, posting a 32% increase, while Gauteng saw a 20% drop, likely linked to service delivery challenges.

Average home prices also saw regional variation. The Eastern Cape led price growth with a 10% year-on-year increase, followed by the North West. The Western Cape retained the highest average price at R2.1 million.

Notably, the recent surge in platinum prices could further boost the North West property market, given the province’s dominance in platinum group metal production.

With inflation below the MPC’s target range and the prime rate at 10.75%, analysts believe there’s a strong case for another interest rate cut at the end of July — a move that could further boost affordability and spur activity in the residential market.

In his latest economic commentary, Dr Botha noted that GDP growth came in at 0.8% year-on-year in Q1, with vehicle sales rebounding and platinum prices surging by 49% since January – a development that could stimulate further housing demand in the North West, South Africa’s key platinum-producing region.

“The continued demise of capital formation, especially in the area of infrastructure, has also contributed to a decline in the Afrimat Construction Index in Q1 2025, which reflects the lethargy of building activity. Unless interest rates start declining at a faster pace, South Africa will continue to experience sub-optimal economic growth, due to the excessively high cost of credit and of capital.”