Tight household finances and weak economic prospects continue to weigh on consumers according to Nedbank.
The financial services group said that financing a home in South Africa has become 35% more expensive since 2020.
This, it said, can be attributed to various factors including higher debt servicing costs, reduced affordability, and tighter lending standards.
Consequently, the residential property market has experienced a significant decline in volumes, dropping by 29% in 2023 and now resting slightly below pre-pandemic levels.
The debt-to-income ratio for consumers is around 63%. A common benchmark to aim for is a DTI ratio below 36%, the lender said.
Despite these headwinds, Nedbank said it managed to increase its market share yoy, across various sectors, including home loans, retail overdrafts, and commercial term loans. However, it has also adopted a more cautious approach, particularly in areas perceived to carry higher risks.
As a result, there has been a deliberate slowdown in credit origination, leading to market share declines in segments such as personal loans and credit cards, Nedbank said.
In light of these challenges, Nedbank has been actively engaged in supporting its clients through various initiatives aimed at financial rehabilitation and asset retention.
In 2023 alone, the bank assisted over 900,000 clients in rehabilitation efforts, with additional support provided to those striving to retain their vehicles and homes. Moreover, through its Assisted Sales programmes, Nedbank facilitated the sale of assets for over 15,000 clients.
Looking ahead, outgoing chief executive officer, Mike Brown said that although geopolitical uncertainties increase forecast risk, "we currently expect the economic environment in SA to remain challenging but improve off a low 2023 base".
The Nedbank Group Economic Unit forecasts SA's gross domestic product (GDP) to increase by 1% in 2024 and inflation to continue to reduce.
The forecast for the South African prime lending rate is to decline by a cumulative 75 bps in the second half of 2024 to end the year at 11%.
Absa financial director Jason Quinn is set to replace Brown as CEO at the end of May 2024.
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