The Western Cape accounted for 29% of ooba Home Loan semigration applications during Q1 2024, up from 14% at the start of 2020.
In contrast, semigration to Gauteng dropped from a peak of 34% in 2019 to 25% during Q1 2024.
“Pre-2020, the majority of semigration in South Africa was the result of workers flocking to Gauteng in search of employment opportunities in the City of Gold,” shares Gavin Lomberg, CEO of ooba Home Loans.
“In the five years since, ooba Home Loans data shows a shift to the Western Cape, with inbound semigration (moving to the province) having more than doubled over this period.”
Investors are taking advantage of the high demand for rentals in the Western Cape, with investment property purchases reaching their highest rate in the past five years.
He noted that while the majority (66%) of semigration property purchases in the Western Cape are intended as main residences, the proportion of investment/rental purchases has been steadily rising, making up 30% of Western Cape semigration applications processed in 2023.
Conversely, the percentage of semigration holiday home purchases in the province has declined from a peak of 7% in 2020 to 4% at the end of 2023.
“In the current high-interest-rate environment, holiday homes are seen as an expensive luxury. Additionally, an increase in foreign buyers snapping up properties in the province’s tourist hotspots is pricing out locals due to their stronger purchasing power.”
He added that the potential for attractive rental investment returns and long-term capital growth in the Western Cape is drawing many investment buyers from other provinces.
The chief executive stated that with tourism booming again in the Western Cape, property investors are making savvy decisions to purchase investment properties that can be easily rented out on both short- and long-term leases.
In spite of economic fluctuations, bank approval rates remain steady at 83.4% of applications processed in Q1 ’24, for ooba Home Loans customers. “This is an indication that the banks’ lending appetites are still robust and – promisingly – that buyers’ financial standing has stabilised in the last year, considering that rates have remained unchanged since May 2023,” said Rhys Dyer CEO of ooba Group.
The latest data from ooba Home Loans show that home loan applicants are not as financially stretched as would be expected in a high interest rate environment. Instalments as a percentage of gross income in Q1 ‘24 averaged out at 19.4% – a slight uptick on the ratio of 18.7% at the start of the rate hiking cycle in November 2021 – but still comfortably below the industry benchmark of 30%.
“Encouraging too is the finding that the ratio of ooba Home Loans applications declined by one bank but approved by another is trending higher (up 2.8% quarter-on-quarter), which clearly illustrates the critical role that bond originators fulfil for homebuyers by sourcing financing options from multiple banks,” he added.
The country’s lenders are further easing pressure on homebuyers by still offering attractive discounts to prime, with the average weighted rate of concession now at -0.52%, 7 basis points cheaper than Q1 ’23, a welcome relief in a time of high interest rates and higher monthly instalments.
The banks are competing for a share of the smaller home loan market, making finance more accessible by easing terms and conditions, and offering better rate discounts.
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