Despite the challenges of exterior components resembling ongoing rate of interest hikes and rising prices of dwelling, the continuing demand for home loans remained comparatively steady in 2022, barely down on 2021 volumes however up on 2020 and 2019 volumes. Rhys Dyer, CEO of ooba Group attributes the sustained demand to the next three key components:
- The growing rates of interest over the yr, culminating in a major price at yr finish of 10.5% stays nicely beneath the long-term common price over the previous 25-years.
- Banks persevering with to compete for home loan enterprise by approving loans on enticing phrases – each when it comes to rate of interest and within the granting of 100% loans.
Home loan trends in 2023
Looking forward, Dyer believes that with many of the rate of interest hikes now behind us, the next six property trends will paved the way in 2023:
1. Buyers need extra ‘bang for their buck’
ooba’s newest statistics point out that whereas Western Cape stays a powerful contender within the property realm, and, whereas costs have been slowing probably the most quickly, common buy value stays the best among the many main areas. “The appeal of the Western Cape clearly does not lie in the relative affordability of homes but rather in the lifestyle offering, the relative security and the competency of municipal management.”
In distinction, the likes of Gauteng South & East Rand have seen a rise within the rise of (repeat?) property costs, regardless of registering the bottom common buy costs in South Africa (at R1.18 million). “Interestingly, Gauteng South & East Rand is the only major region in which applications from first-time buyers remains consistently above 50%. We anticipate that the demand for areas such as these will grow in 2023 as buyers plan carefully and realise their dream of homeownership by purchasing in areas where they can manage affordability.”
2. Shifts within the profile of a first-time homebuyer
“While the past few years saw a sharp uptick in first-time homebuyers due to the lower interest rates, 2022 showcased just how ‘rates sensitive’ this demographic truly is with the number of first-time buyers steadily declining and those that are buying, buying properties that fit their affordability constraints,” says Dyer.
In 2023, Dyer anticipates a continued regular decline in first-time homebuyers as many choose to lease reasonably than purchase. “However, data indicates that Gen Z’s – the next generation of South Africa’s workforce – believes in the power of home ownership so we expect to see increased uptake in the next few years.”
3. The fall of 100% home loans
While approval charges for 100% home loans will stay excessive in 2023, Dyer anticipates that the variety of functions for 100% home loans will decline. “In the current climate, homebuyers are prioritising deposits as a way to reduce their monthly repayments and achieve a better interest rate on their home loan. Our last oobarometer saw a growth rate of 18.2% in the average size of deposits and our expectation is that this will continue,”
He provides that ooba “anticipates that homebuyers will continue to take charge of their financial wellbeing by prioritising savings and affordability before applying for a home loan.”
4. Buy-to-let funding growth
Buy-to-let investments (properties bought as an funding) will proceed to achieve floor in 2023. “Demand for the financing of buy-to-let properties has grown by around 30% year-on-year and this trend is particularly notable in the Western Cape where the rate of applications for investment properties reached a high of 24.2% in October ’22.”
Investors need to ‘cash in’ on excessive demand within the rental market resulting from increased rates of interest, and this development is about to proceed nicely into 2023.
5. What’s trending with off-plan properties
New residential developments (also referred to as off-plan properties) have skilled a notable surge in recognition amongst South African homebuyers, and this development is about to speed up for the foreseeable future.
ooba’s knowledge signifies a 117% enhance in accepted home loans for new developments year-on-year. “This is largely driven by affordability. The homebuyer pays zero transfer fees and bond repayments are delayed until construction is complete.”
In addition, property builders are driving this development. “Developers are paying close attention to the needs of the homebuyer and are catering to these through new and exciting developments. Buyers are spoilt for choice and are opting for lock-up-and-go, secure living through off-plan properties.”
6. Is semigration nonetheless a factor?
“Yes,” says Dyer. “While many have gone back to their 9-to- 5 office job, some are still opting to commute and some corporates have chosen to continue with the hybrid, flexible working model.”
When trying to the demand, Dyer says that homebuyers are trying for extra space and extra inexpensive pricing. “Picturesque areas less than two hours away from major metros such as Betty’s Bay and Greyton are becoming strong contenders in the semigration movement,”
“We expect various small towns to continue to feature prominently in our home loan data in 2023” he concludes.
Rhys Dyer, CEO of ooba Group.
