Recent data suggests that the property market in South Africa may be on the verge of a recovery, with home loan values and volumes showing signs of improvement.
Encouraging Trends in Home Loans
According to BetterBond’s latest Property Brief, there is cautious optimism about the future of the property market. The data reveals that national home loan values have increased by 1.2% year-on-year as of April 2023. More impressively, home loan volumes have surged by 20% over the same period.
Despite these positive indicators, the number of new home loan applications over the past 12 months is still 15% lower compared to the previous year. However, the index for new home loan applications in April 2024 showed a 2.3% increase from the first quarter of the year, signaling potential growth.
Impact of Monetary Policy
Bradd Bendall, interim CEO of BetterBond, highlighted the potential benefits of a recent drop in consumer price inflation—from 5.3% in March to 5.2% in April. Bendall suggested that this decrease could lead to lower interest rates, offering relief to debt-burdened households and stimulating further home loan activity.
“In these uncertain times, as South Africans prepare for the upcoming elections, it’s reassuring to see the property market’s resilience. House prices are continuing to rise, even if modestly,” Bendall remarked. “With the rand performing well against other currencies and CPI on a downward trend, we hope the Monetary Policy Committee (MPC) will announce a much-needed interest rate cut when it meets on 30 May, the day after the elections.”
A Note of Caution
However, despite Bendall’s hopeful outlook, it is unlikely that the MPC will reduce interest rates in the near future. Although inflation has decreased, it remains above the midpoint of the target range of 3% to 6%, making an immediate cut in the repo rate from its current 15-year high of 8.25% improbable.
Razia Khan, chief economist for Standard Chartered Bank, noted, “Even with this better-than-expected inflation outcome, the South African Reserve Bank has been signaling its preference for a 3% inflation target. Therefore, we don’t anticipate any easing of the policy rate until November.”
At Gerhard Barnard Inc Attorneys & Conveyancers, we remain committed to keeping you informed about the latest developments in the property market. Our team is here to provide expert advice and support for all your conveyancing needs as the market evolves.
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