Strong demand for home loans is now well above 2019 levels
The majority of mortgages issued in the second quarter of 2021 were for people with gross monthly income of over R15,000.
- Home loans totaling more than Rand 56.6 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 has been a strong growth in home loans for the more expensive properties.
New data shows South Africans are buying homes at breakneck speed as demand increases for more expensive properties.
Home loans with a total value of over Rand 56.6 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 harsh foreclosure period. The key rate has remained stable 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 time in a row.
According to a report on the consumer credit market 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 54, R27 billion granted in the first quarter of the year, and the number of home loans granted also increased slightly.
Almost 90% of mortgage deals in the second quarter were over R700,000.
A record repo rate boosted demand for housing, especially in the lower end of the market. Data from Lightstone Property shows that house prices in the category below R250,000 increased by more than 12% in the year through August, while house prices below R700,000 recorded a gain of 5.9%. In comparison, homes over 1.5 million rand rose 4.9%.
Low interest rates
According to Carl Coetzee, CEO of BetterBond, after more than a year of record interest rates, buyers in the upper end of the market are now also seizing the opportunity to expand their homes and ask for larger bonds.
“The strongest percentage growth in the number of formal grants for the 12 months ending August 2021, at 45.49%, is for homes with a purchase price above R3 million. There was a further 38.7% increase in the number of formal grants. for houses between 2.5 and 3 million rand, ”Coetzee explains.
The size of bonds approved for first-time homebuyers is up just over 13%.
“While much of the bond activity recorded last year after the foreclosure restrictions eased in June came from first-time homebuyers, we are seeing buyers at the high end of the market are also pulling make the most of low interest rates, ”Coetzee said.
“Changing patterns of homeownership have intensified the demand for larger sectional title units and freehold properties with gardens or access to amenities. There is also no longer a need to live close to the office and buyers are considering areas that offer good value for money and quality of life. “
Another trend he points out is a shift in demand from rental to home ownership, thus intensifying buyer activity, leading to growth in house prices in many areas.
According to a survey of realtors, 21% of transactions were reduced due to financial pressures, followed by 16% of sales to move to a home with more space.
Adrian Goslett, CEO of RE / MAX Southern Africa, expects the local market to see a stabilization in buyer activity in due course.
“I don’t think the South African market will remain as active as it is forever. Interest rates will not stay so low forever and buyer demand will decline alongside any future rate hikes. interest, ”Goslett said.
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