Hot demand for home loans well above 2019 levels

The majority of mortgages in the second quarter of 2021 were given to people with a gross monthly income of more than Rand 15,000.

  • In the second quarter of this year, home loans with a total value of more than R 56.6 billion were granted.
  • That’s 41% more than in the same quarter of 2019 before the pandemic.
  • There was strong growth in home loans for more expensive properties.

New data shows that South Africans are buying homes at breakneck speed and the demand for more expensive properties is increasing.

Home loans totaling more than ZAR 56.6 billion were granted in the second quarter of this year, an increase of more than 40% over the same period in 2019 prior to the arrival of the Covid-19 pandemic.

In the same quarter of 2020, less than ZAR 13 billion was made in home loans – reflecting the harsh effects of the harsh lock-up period. The key rate has been stable at 7% since July 2020, with the Monetary Policy Committee (MPC) resolving in September to keep the repo rate at 3.5% for the seventh time in a row.

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 of 54.27 billion in the first quarter of the year, as was the number of mortgages Home loan has increased slightly.

Almost 90% of the mortgage contracts granted in the second quarter are in excess of R 700,000.

A record low repo rate has fueled demand for home ownership, especially at the lower end of the market. Data from Lightstone Property shows that house prices in the category under R 250,000 rose more than 12% in the year through August, while house prices below R 700,000 rose 5.9%. In comparison, the houses over 1.5 million R 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 taking the opportunity to upgrade their homes and apply for larger bonds, says Carl Coetzee, CEO of BetterBond.

“The largest percentage growth in the number of formal grants for the 12 months ended August 2021, at 45.49%, was for homes with a purchase price of more than R3 million for homes between R 2.5 and R 3 million,” says Coetzee.

The approved bond volume for first home buyers rose by just over 13%.

“While much of the bond activity recorded last year after the lockdown restrictions were eased in June came from first home buyers, we see buyers at the higher end of the market making the most of the low interest rates,” says Coetzee.

“Changing home ownership patterns have increased the demand for larger condominiums and condominiums with gardens or access to amenities. Also, there is no longer a need to live near the office and buyers are thinking of areas that offer value for money and high quality living. “

Another trend he points to is a shift in demand from rent to home, which is intensifying buyer activity and driving house price growth in many areas.

According to a survey of real estate agents, 21% of deals were downsized due to financial pressures, followed by 16% of sales to upgrade to a home with more space.

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

“I don’t think the South African market will stay that active forever. Interest rates won’t stay this low forever, and buyer demand will decline with future rate hikes,” says Goslett.

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