Pent up demand for properties in South Africa has seen residential property sales skyrocket since the reopening of the property market at the start of June. This property market boom continued through the third quarter, fuelled by low interest rates and favourable lending terms from South African banks, according to bond originator, Ooba.
“Interest rate cuts throughout 2020 contributed to a revival in the property market. The South African Reserve Bank cut interest rates five times this year, reducing the prime rate to 7%, the lowest level since 1966. This is the biggest margin in rates cut in decades as the Reserve Bank attempts to ease the financial and economic fallout from the Coronavirus pandemic, particularly for individual households,” said chief executive officer, Rhys Dyer.
He added that buyers who previously could not afford a property are entering the market for the first time due to lower interest rates and lower transfer duties, particularly in the middle-priced segment.
“This trend is driving many renters to become property owners. This is evident in the average age of home loan applicants for Q3 of 2020. On average buyers are one-year younger from 38 to 37 years of age, while the age of first-time buyers has dropped from 35 to 34 years compared to Q3 2019,” said Dyer.
Cheaper borrowing costs also enable home buyers to purchase bigger and more expensive properties.
This factor, coupled with demand for housing running ahead of stock supply in certain price categories, is evident in the increase in the average purchase price from R1,193,944 in Q3 of 2019 to R1,304,756 in Q3 2020, which equates to a 9.3% growth year-on-year.
Over the same period, the average purchase price for first-time buyers increased by 15% to reach R1,082,857. Anecdotal evidence shows that the growth in a segment of the economy who are working from home is also creating a demand for bigger homes, contributing towards this unexpected rise in the average purchase price. Read more