Where property deposits are highest and lowest in South Africa

Property deposits in KwaZulu-Natal have surged, according to Jackie Smith, head of Buyers Trust, a subsidiary of ooba. In Q1:2023, KZN had the fifth highest average deposits, but by Q1:2024, it had the highest, averaging 12.8% of the purchase price.

The Eastern Cape follows closely with an average deposit size of 11.2%, and Mpumalanga with 10.6%.

Smith noted that income growth for home loan applicants in KwaZulu-Natal and the Eastern Cape has significantly outpaced House Price Inflation (HPI) in these regions. This allows affluent buyers to afford larger deposits upfront due to more affordable property prices.

Conversely, in Mpumalanga, HPI was 9.5% in Q1:2024, while average applicant incomes only grew by 6.4%. Lower income applicants in this region are often seen as higher risk by lenders, who may require substantial deposits for loan approval.

Smith stated that larger deposits give home buyers immediate equity in their homes, increase loan approval chances, and secure better interest rates. Deposits demonstrate a buyer's ability to save and finance part of their purchase, thus lowering their risk profile and giving them more leverage with banks.

the latest Q1 ‘24 oobarometer from ooba Home Loans showed that 47% of first-time homebuyers put down a deposit in Q1 ‘24, as compared to 43% in Q1 ‘23.

In regions where deposits are below the national average of 7.3%, such as Johannesburg, the Western Cape, Pretoria, North West, and Limpopo, various factors play a role. The Western Cape has the second highest HPI and highest average rental costs, leading to smaller deposits averaging 5.6%, a decrease of 2.2% year-on-year.

Limpopo saw the biggest year-on-year decline in deposit sizes, from 12.8% in Q1:2023 to 5.4%. This drop is linked to buyers purchasing more expensive homes, as applicant income growth in Limpopo is the second highest in South Africa. Smith pointed out that more expensive homes often have smaller deposit percentages relative to the purchase price.

The lowest deposits are in Pretoria and North West, averaging 4.5% of the purchase price, although this still represents a 2.2% increase from the previous year.