Is Now the Right Time to Buy? SA Housing Market Update

As of Q1 2023, the prevailing average house prices in South Africa stands at R1,434,448. This figure reflects a slight 0.8% increase from the previous quarter, when it was R1,422,992

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Despite facing two interest rate hikes in the same quarter, data from ooba Home Loan’s Q1 2023 oobarometer indicates that opportunities still exist in the property market. Homebuyers are seizing these opportunities, taking advantage of competitive interest rate discounts offered by the nation’s major banks.

However, the recent interest rate hikes have put pressure on consumers’ disposable incomes, leading to a steady decline in home loan applications. In Q1 2023, applications dropped by 20% compared to the same period in 2022, with instructed bond values following a similar pattern.

Nonetheless, this dip in applications aligns with the natural interest rate cycle, resembling the volumes observed in Q2 and Q3 2019 when prime lending rates were at 10%. For prospective homebuyers, the slow 0.8% house prices growth may be a concern for sellers in the short term, but it brings good news. Slower house prices inflation (HPI) means that properties are becoming more affordable relative to household incomes.

Across South Africa’s provinces, average purchase house prices have remained relatively stable, except for Kwa-Zulu Natal, which continued its recovery from a challenging previous quarter. The Eastern Cape experienced a decline in average purchase price from R1.73 million in December 2022 to R1.46 million in Q1 2023 after its strong 7.01% year-on-year growth in 2022. Meanwhile, the Western Cape boasted the highest average purchase price at R1.81 million, followed by Gauteng North and West at R1.5 million.

The nine consecutive interest rate hikes have led to a 20.2% increase in monthly bond repayments since Q3 2021. However, on a national level, gross earnings have grown significantly faster than house prices, with average monthly earnings increasing by 22.6% from Q1 2019 to Q1 2023, while house prices have grown by 16.1%.

For those interested in what they can buy for the average purchase price in Q1 2023, here are some property examples:

• A 2 Bedroom Townhouse in Faerie Glen, Pretoria, priced at R1,430,000.
• A 3 Bedroom House in Parsonvlei, Gqeberha, priced at R1,415,000.
• A 3 Bedroom apartment in Hermanus Beach Club, priced at R1,400,000.

These figures offer valuable insights into the current state of the South African housing market, allowing potential buyers to make informed decisions.

In the ever-evolving landscape of the South African housing market, Q1 2023 has brought forth intriguing trends and insights for both buyers and sellers alike.

Price Dynamics The average house price in South Africa for Q1 2023 stands at R1,434,448. While this reflects a modest 0.8% increase from the preceding quarter, it’s essential to note that these numbers indicate a relatively stable market. For property sellers, this may raise concerns about short-term returns, but for aspiring homeowners, it presents an opportune moment to enter the market. The slow growth in house prices, often referred to as house price inflation (HPI), is making properties more affordable in relation to household incomes.

Challenges and Opportunities Despite two interest rate hikes in Q1 2023, the property market maintains its resilience. ooba Home Loan’s Q1 2023 oobarometer suggests that opportunities abound for buyers who are savvy about securing competitive interest rate discounts offered by major banks. However, these rate hikes have squeezed the disposable income of consumers, leading to a steady decline in home loan applications. Compared to Q1 2022, applications are down by 20%, and instructed bond values have followed suit.

But there’s a silver lining to this decline, as it mirrors historical patterns in the natural interest rate cycle. Similar application volumes were seen in Q2 and Q3 2019, a period when prime lending rates were at 10%. Thus, this dip can be seen as a part of the market’s ebb and flow.

Regional Variations Across South Africa’s provinces, average purchase prices have remained relatively steady. Kwa-Zulu Natal is experiencing a notable recovery after a challenging previous quarter, while the Eastern Cape has lost some momentum, with its average purchase price dropping from R1.73 million in December 2022 to R1.46 million in Q1 2023. The Western Cape leads the pack with an average purchase price of R1.81 million, followed closely by Gauteng North and West at R1.5 million.

Financial Landscape The South African property market has been influenced by nine consecutive interest rate hikes, causing monthly bond repayments to increase from 18.3% in Q3 2021 to a peak of 20.2% in Q1 2023. Despite this, the rate of growth in gross earnings nationwide surpasses that of house prices. According to StatsSA, average monthly earnings have surged by 22.6% from Q1 2019 to Q1 2023, while house prices have grown by 16.1%.

Real Estate Opportunities For those intrigued by what their budget can fetch in Q1 2023, here are some property examples:

• A 2 Bedroom Townhouse in Faerie Glen, Pretoria, priced at R1,430,000.
• A 3 Bedroom House in Parsonvlei, Gqeberha, priced at R1,415,000.
• A 3 Bedroom apartment in Hermanus Beach Club, priced at R1,400,000.

These examples showcase the range of options available to South Africans in the current housing market, allowing them to make informed decisions about their real estate endeavors. Whether you’re a prospective homeowner or an investor, staying informed about market dynamics is key to success in the world of South African real estate.