Hot demand for home loans now far above 2019 levels

accreditation
0:00
play article
Subscribers can listen to this article
The majority of mortgages granted in the second quarter of 2021 were to people with a gross monthly income of more than R15 000.
The majority of mortgages granted in the second quarter of 2021 were to people with a gross monthly income of more than R15 000.
Getty Images
  • Home loans with a total value of more than R56.6 billion were granted in the second quarter of this year.
  • This is 41% more than in the same quarter of 2019, before the pandemic.
  • There was big growth in home loans for pricier properties. 

New data show that South Africans are buying homes at breakneck speed, with demand picking up for more expensive properties.

Home loans with a total value of more than R56.6 billion were granted in the second quarter of this year, an increase of more than 40% compared to the same period in 2019, before the arrival of the Covid-19 pandemic.

In the same quarter of 2020, less than R13 billion was granted in home loans – reflecting the harsh impact of the hard lockdown period. The prime lending rate has held steady at 7% since July 2020, with the Monetary Policy Committee (MPC) deciding in September to keep the repo rate at 3.5% for the seventh consecutive time. 

According to a Consumer Credit Market Report for the second quarter of 2021 released by the National Credit Regulator (NCR), the value of mortgages granted in the second quarter of this year was 4% higher than the total value of R54.27 billion granted in the first quarter of the year, and the number of home loans granted also increased slightly.

Almost 90% of mortgage agreements granted in the second quarter were for more than R700 000.

A record-low repo rate has fuelled demand for homes, particularly on the lower end of the market. Data from Lightstone Property show that house prices in the category below R250 000 surged by more than 12% in the year to August, while house prices below R700 000 saw a 5.9% gain. By comparison, houses above R1.5 million rose by 4.9%.  

Low interest rates

After more than a year of record-low interest rates, buyers at the upper end of the market are now also seizing the opportunity to upscale their homes and applying for larger bonds, according to Carl Coetzee, CEO of BetterBond. 

"The largest percentage growth in the number of formal grants for the 12 months ending August 2021, at 45.49%, has been for homes with a purchase price of more than R3 million. There's been a further 38.7% increase in the number of formal grants for homes of between R2.5 million and R3 million," says Coetzee. 

The approved bond size for first-home buyers is up by just over 13%. 

"While much of the bond activity recorded last year after the easing of lockdown restrictions in June was from first-home buyers, we are seeing that buyers at the upper end of the market are also making the most of the low interest rates," says Coetzee.

"Shifting home ownership patterns have intensified the demand for larger sectional title units and freehold properties with gardens or access to amenities. It’s also no longer necessary to live close to the office and buyers are contemplating areas that offer value-for-money and quality of life."

Another trend he points to is a demand shift from renting to homeownership, thus intensifying buyer activity, driving house price growth in many areas.

According to a survey among estate agents, 21% of transactions were to downscale due to financial pressure, followed by 16% of sales to upgrade to a home with more space.

Adrian Goslett, CEO of RE/MAX of Southern Africa, expects that the local market is likely to experience a levelling off in buyer activity in due course. 

"I do not believe that the South African market will remain as active as it is forever. Interest rates won't remain this low forever and buyer demand will dwindle alongside any future interest rate hikes," says Goslett.

Get the biggest business stories emailed to you every weekday.
Go to the Fin24 front page
.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
16.14
-1.3%
Rand - Pound
21.36
-0.4%
Rand - Euro
18.26
-0.4%
Rand - Aus dollar
11.30
-0.5%
Rand - Yen
0.14
-0.4%
Gold
1,783.48
0.0%
Silver
22.55
0.0%
Palladium
1,816.00
0.0%
Platinum
936.31
0.0%
Brent Crude
69.88
+0.3%
Top 40
64,307
-0.4%
All Share
70,808
-0.3%
Resource 10
66,503
-1.6%
Industrial 25
93,791
+0.1%
Financial 15
13,982
+0.7%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot