The latest statistics from ooba Home Loans for Q1 2024 points to a slowdown in homebuying activity due to the prevailing high interest rate environment.
However, there are encouraging indicators for the residential property market.
Rhys Dyer, CEO of the ooba Group, said that sustained high interest rates have impacted ooba Home Loan's application volumes for the quarter.
Nevertheless, resilient South Africans may see relief with predicted rate cuts later in 2024.
Although home loan application volumes for Q1 2024 were down by 9% compared to Q1 2023 and 25% compared to Q1 2022, there has been an 8% increase in application volumes compared to Q4 2023, indicating some life in market activity.
Additionally, rising property prices, increased first-time homebuyer deposit values, and growing buy-to-let investments alongside steady bank approval rates are all a good sign said Dyer.
Property Price Growth Driven by Affluent Buyers
Data from Q1 2024 shows an upward trend in the average price of properties originated through ooba, with a year-on-year growth of 3.1% across both first-time and national property price categories.
Notably, the average national purchase price now stands at R1,479,327, and at R1,171,798 for first-time homebuyers.
Dyer said that affluent homebuyers are fuelling this growth, with 62% of the value of applications processed by ooba Home Loans falling within the purchase price band exceeding R1.5 million.
Regional House Price Inflation Rates
The Western Cape and Mpumalanga registered the highest year-on-year growth in house prices originated by ooba Home Loans, demonstrating robust increases of 9.4% and 9.5%, respectively.
This growth is attributed to affluent buyers purchasing properties in high-demand regions.
“Our latest statistics show that almost 60% of the value of applications processed in Q1 2024 were from homebuyers who had a monthly income in excess of R83 300, compared to 43% in Q4 2021, at the start of the rate hiking spree,” said Dyer. “These homebuyers are less impacted by the external economic pressures currently faced by consumers, and are seeing opportunities in the current market.”
Average Income Exceeds House Price Inflation
The average gross income of home loan applicants processed in Q1 2024 surpassed levels recorded a year prior, indicating the dominance of affluent homebuyers in the market.
This trend is particularly pronounced in regions like the Free State, where applicant income growth outpaces house price inflation.
Continued Rise in Buy-to-Let Investments
The prevalence of buy-to-let investors is on the rise, with investment properties accounting for 13% of ooba Home Loan's application volumes nationally, up from 8% in Q1 2023.
The Western Cape remains a key driver of investment demand, with the Eastern Cape also experiencing a notable increase.
Subdued First-Time Buying Activity
First-time homebuying activity has declined, indicating sensitivity to interest rates amidst tough economic conditions.
However, prospective buyers are using this time to accumulate savings for larger deposits, recognising the benefits of lower long-term financial commitments, said Dyer.
Steady Bank Approval Rates
Bank approval rates remain stable at 83.4% of applications processed by ooba Home Loans in Q1 2024, indicating continued robust lending appetites despite economic fluctuations.
Competitive Rates and Incentives from Banks
Lenders continue to offer competitive rates, with average weighted rate concessions now at -0.52%, making finance more accessible and affordable for homebuyers. Banks are also offering additional concessions as incentives for new customers, said Dyer.
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