South Africans between the ages of 18 and 35 are showing a growing interest in purchasing homes as a wealth-building strategy.
According to ooba Home Loans, this age group are spending more on a property year-on-year, having experienced a 30% increase in the average purchase price paid over the past five years.
Buyers aged between 26 and 30 registered the strongest annual price growth in the average purchase price at 4.2% while homebuyers aged 37 and older are paying 2.1% less in 2024 than in 2023, which reflects increasing financial pressure on households, resulting in some ‘buying down’ to save on monthly home loan repayments.
Purchase prices unpacked
While there are some signs of recovery in property prices, ooba Home Loan’s Q2 2024 statistics reveal that real property price growth remains in the negative territory because of elevated inflation.
When compared to Q1 2024, both the national and first-time homebuyers’ average purchase price has dipped with the national average purchase price now at R1 458 924, dropping 1.4% on Q1 2024 while the first-time homebuyers’ average purchase price is down by 1.8% on last quarter – now at R1 150 238.
SA’s frontrunner, the Western Cape, registered the strongest growth in Q2 2024 across both the first-time and repeat-homebuyer categories (7.8% and 6.3% nominal increases respectively) and it is the only region to record real (inflation-adjusted) increases in property prices.
KwaZulu-Natal saw the largest decline in both the first-time and repeat homebuyer categories (-6.3% and –7.2% respectively).
Regions recording a year-on-year nominal increase in the average purchase price include Limpopo, Free State, and the Eastern Cape while Mpumalanga, a strong contender in the past, has slipped into negative territory.
In the first-time homebuyers’ category, other strong contenders in the average purchase price include Gauteng South and East, Free State, and Limpopo while the Eastern Cape, Tshwane and North West, and Mpumalanga, have experienced sharp declines.
The Free State registered the lowest average purchase price overall for Q2 2024 at R1.01 million.
Banks soften deposit requirements
The national average deposit is tracking lower year-on-year, now at R92 673 (6.4% of the average purchase price) – down by 23.8% from Q2 2023’s average deposit of 8.4%. The national average approved bond size has increased by 4.6%, exceeding the increase in the national average purchase price, which rose by only 2.3%.
ooba Home Loans says this is evident in the Q2 2024 loan-to-value (LTV) data for applicants aged 37 plus where the category received significantly more generous loans relative to value (up by 5.2% year-on-year) which could be the banks’ way of stimulating activity amongst the largest portion of the market.
First-time homebuyers are putting down larger deposits than their established second-time homebuyer counterparts. Despite a sharp downturn of 11% quarter-on-quarter (now at 9.7% – R111 279), the average deposit paid by a first-time homebuyer still exceeds that of the average of all homebuyers at 6.4% (R92,673) with an improvement of 1% year-on-year in this market segment.
Banks’ hot competition is a boon for buyers
Bank approval rates remain steady, recording only a minor dip year-on-year. The ratio of applications declined by one bank but approved by another is trending slightly lower year-on-year – down from 45% in Q2 2023 to 43.7% in Q2 2024.
Investment property records highest quarterly uptick to date
The recurring buy-to-let trend in the Western Cape continued in Q2 2024 with the Western Cape the key driver behind the national surge in investment demand, accounting for 32.4% of all applications received for the region in Q2 2024 (up by a healthy 2% year-on-year).
Nationally, Q2 2024 saw the highest quarterly average (12%) in the percentage of applicants purchasing an investment property – up by 3% from 9% in Q2 2023.
The second highest demand for investment properties stems from buyers aged between 18 and 25 which has risen strong since 2022. This is indicative of the generational wealth strategies that Gen Z’s are currently deploying.
