Cape Coastal Homes Logo
You are here: Cape Coastal Homes / Latest News / 60 Rise In Cost Of Credit Over Last 18 Months Led To 21 Drop In Home Loan Applications

60% Rise In Cost Of Credit Over Last 18 Months Led To 21% Drop in Home Loan Applications

SHOWING ARTICLE 81 OF 1107
GALLERY

60% Rise In Cost Of Credit Over Last 18 Months Led To 21% Drop in Home Loan Applications

According to Betterbond, the biggest (home loan) bond originator in South Africa, the SA property market is operating in a rather tough market right now due to the rapid increase in the cost of credit - rising by 60% of the last 18 months on the back of interest rates rises.

BetterBond's April 2023 Property Brief raises the following highlights:

  • Total home loan applications submitted

The number of new home loan applications were 21% down year on year for the first quarter of 2023.

  • Home loan applications from first-time buyers

The majority of all home loan applications still come from first-time buyers and this has remained stable over the past two years. However, home loan applications from first-time buyers have been on a downward trajectory, with their proportion of all applications going from 71% in Q1 2020 to below 64% in Q1 2023.

  • Average home purchase price

The average home purchase price for all buyers increased year on year, from R1.423 million in Q1 2022 to R1.457 million in Q1 2023. However, when adjusted for inflation, it declined by 4.3%.

  • Average approved home loan value

For first-time buyers there have been year-on- year declines in average home prices of almost 1% in nominal terms and 7% in real terms. Like many residential property trends over the past 18 months, this too was impacted by higher interest rates.

  • Average value of home loans by age group

'Age before beauty' when it comes to homebuying!

  1. Buyers in the 41-50 age group secured home loans valued at R1.66 million on average, in Q1 2023. This is a nominal increase of almost 2% compared with Q1 2022.
  2. By comparison, for buyers aged 21-30, the average value of approved home loans was R1.18 million in Q1 2023.
  • Percentage change in home price for all buyers

In nominal terms, all regions across South Africa recorded positive growth in average home prices for the 12 months ending March 2023.

When adjusting for inflation, however, only the Western Cape figures remain positive.

During the preceding 12 months (ending March 2022), Greater Pretoria significantly outperformed the rest of the country, with an increase of 13% in average home prices, followed by the Eastern

Cape (8%) and Mpumalanga (7%).

  • Percentage change in home price for first-time buyers

Viewed from the perspective of first-time homebuyers, the areas of South Africa where average home prices have increased the most, remained similar for the two years ending March 2023:

- In 2022/23 the Western Cape was the top-performing region and in 2021/22 Greater Pretoria was number one.

- For the 12 months ending March 2023, Greater Pretoria was joint second for all buyers, and third for first-time buyers.

- Greater Pretoria featuring prominently on these lists confirms its appeal in terms of homeownership.

According to Dr Roelof Botha (Economist affiliated to GIBS), the 60% increase in the cost of credit over the past 18 months on the back of interest rates rises, will continue to dampen economic activity in our country, and could keep exerting downward pressure on property purchases.

Homebuying has also been under pressure due to the loss of formal sector jobs during the Covid-19 pandemic. Although 913,000 formal sector jobs have been created since Q2 2020, when lockdown restrictions were at their harshest, the current total formal employment figure of just under 11 million is still 300,000 short of Q1 2020.

Author Betterbond / Dr Roelof Botha
Published 03 May 2023 / Views -
Disclaimer:  While every effort will be made to ensure that the information contained within the Cape Coastal Homes website is accurate and up to date, Cape Coastal Homes makes no warranty, representation or undertaking whether expressed or implied, nor do we assume any legal liability, whether direct or indirect, or responsibility for the accuracy, completeness, or usefulness of any information. Prospective purchasers and tenants should make their own enquiries to verify the information contained herein.