Gauteng buyers dominate weak housing market

Property buyers in Gauteng make up the majority of successful home loan applications. Picture: Tamuka Xulu/Pexels

Property buyers in Gauteng make up the majority of successful home loan applications. Picture: Tamuka Xulu/Pexels

Published Jul 18, 2023


Gauteng residents are not letting the tough economic conditions stop them from becoming homeowners, making up more than 50% of the total number of home loans granted over the past year.

From July 2022 to June 2023, buyers from this province – including both repeat and first-time buyers – dominated home loan financing with BetterBond.

This is only one slice of property market activity that can be viewed positively though as, in general, property sales are taking a hit in the current interest rate cycle.

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Lightstone Property data shows that, as at July 4, a total of 30,343 bond registrations were recorded at the Deeds Office for the period April to July 2023. The RE/MAX National Housing Reports reveal that this figure is down by a whopping 43% on Q2’22 figures.

Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa notes, however, that Q2’22 was a period of unprecedented activity within the local housing market, so this needs to be considered when looking at the year-on-year comparisons.

The same data also reflects that the number of transfers – both bonded and unbonded, recorded over the same period amounted to 45,147. When reviewed against the figures from previous RE/MAX reports, this amount is down by 42% year-on-year.

Despite the decline in the number of transfers, national house price inflation is 3,77%, a slight increase since April 2023, according to Lightstone. The national average price of a sectional title property is R1,126m while the average price of a freehold home is R1,47m. The RE/MAX data reveals these figures to be year-on-year increases of 7% and 3% respectively. It also reports that the average selling price for their network in Q2’23 is 2.9% up compared to the same period last year. However, the average active RE/MAX Listing Price for Q2’23 was down by 4% year-on-year and amounted to R3,054m.

“It is important to note the time difference between registered sales prices and active listing prices. The stats from our website possibly represent a more current view of what house prices are doing. I wouldn’t be surprised if, in due course, the registered sales data starts to reflect a similar dip in average sales prices,” Goslett says.

The group’s data reveals that the Western Cape was once again the most searched province on during Q2’23, with these suburbs claiming the top five search positions:

  1. Parklands
  2. Bloubergstrand
  3. Sunningdale
  4. Table View
  5. Claremont

Goslett adds: “Despite the fact that RE/MAX SA has more agents operating in Gauteng, for the first time in a very long time, our total year-to-date registered sales value in the Western Cape has exceeded Gauteng, and this was driven by higher average selling prices in that region (R2.6 versus R1.5m).

When it comes to sales volumes, however, BetterBond’s Greater Pretoria (14%) and Johannesburg North West (20%) and South East (19%) regions accounted for 53% of all buyers’ successful home loan applications.

In terms of both groups of homebuyers, the Western Cape and KwaZulu-Natal recorded the next best levels of activity, with 16% and 11% respectively, according to BetterBond’s July Property Brief.

Unsurprisingly, rising interest rates and inflation in this economic climate are taking their toll on the property market with the number of home loan applications decreasing during the current Reserve Bank hiking cycle. Buyers who are still investing in property are purchasing homes in the lower price brackets.

“Between May and June this year, the share of home loans granted for properties costing less than R1,5 million has increased, while buying in all price brackets above R1,5m has decreased. The biggest drop has been for homes priced above R3m.”

There has been an 8% increase in the share of home loans granted for purchase prices below R500,000.

Picture: BetterBond Property Brief

The average home loan granted is currently just below R1,2m, while first-time buyers are paying an average of R1m.

“This means the latter group of homebuyers is maximising the government’s increased transfer duty threshold, which was moved up to R1,1 million in February 2023,” the BetterBond report states.

When comparing the bond originator’s regions across the country, average home loan values are 67% higher for all buyers and 61% higher for first-time buyers in the top-performing Western Cape, versus the North West province, at the bottom of the list.

Picture: BetterBond Property Brief

Other highlights of the Property Brief include:

  • R1,48m – the average home loan in the Western Cape
  • 41% – Johannesburg’s share of home loans granted to first-time buyers nationally

South African property market outlook

Market conditions are beginning to get tough, Goslett states, explaining that fewer transactions are occurring. This is leading to a dip in achievable sales prices.

“On a micro level, each market will have its own set of unique trends, but on the macro level, sellers will need to be realistic when setting an asking price if they want to secure a timeous sale within the current market. The South African property market has proven to be resilient, and I have full confidence that the market will recover as soon as inflation is under control and interest rates begin to stabilise.”

Echoing this, Seeff Property Group chairman Samuel Seeff the market is becoming challenging for sellers and first-time buyers. Overall we are undoubtedly in a buyer’s market, so sellers need to price accurately as buyers are able to dictate prices.

For buyers though, this could be one of the best times to buy as the market feels similar to the period before the 1994 elections and the 2008 Global Financial Crisis.

“Those who had bought in 1993 or 2006/7 with the perceived risk at the time, subsequently benefited greatly from good capital growth which followed.”

Seeff adds too that the interest rate will come down again. Prices are flat and the banks are still lending, albeit that buyers will have to budget for the higher rate right now. Staking your claim in the property market right now could very well stand you in good stead.