Analyzing the Surge in Home Loan Applications in South Africa

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SIMON BROWN: I’m currently speaking with Bradd Bendall, the National Head of Sales at BetterBonds. Bradd, I appreciate you taking the time. Your latest sales report shows that home loan applications were very strong in July—truly impressive. We’ve noticed substantial increases both quarterly and annually. It seems the rate cuts are starting to have a positive effect.

BRADD BENDALL: Good morning, Simon. Indeed, these are exciting times. As you pointed out, the market is beginning to rebound. July’s applications were up 14% compared to the previous quarter and 12% year-on-year. Things are certainly looking encouraging. The rate cuts are definitely starting to influence the market, which has been long awaited.

SIMON BROWN: It’s been a tough year and several challenging ones following the record low rates of 2021. Are we seeing any increases in the prices of homes purchased in July?

BRADD BENDALL: Yes, we are seeing an upward trend in home prices. The average home price has crossed the R1.6 million threshold for the first time, reflecting a 2.1% increase year-on-year. Furthermore, first-time homebuyers are now averaging R1.3 million, a significant rise.

SIMON BROWN: R1.6 million is indeed noteworthy. Is this the current standard, or an all-time high for property values?

BRADD BENDALL: Yes, the average home price of R1.6 million is indeed a new record. The R1.3 million average for first-time buyers also represents a historic high. Both amounts surpass July’s inflation rate of 3%, which is quite significant.

SIMON BROWN: The report also mentions banks asking for larger deposits. Is this a strategy from the banks, or are home buyers offering more cash upfront?

BRADD BENDALL: It seems to be a mix of both, Simon. Banks are still eager to lend, and their lending criteria haven’t changed much. It could also be that consumers have managed to save up, although I’m skeptical given the challenging circumstances over the past few years.

Deposits have increased by 14% since Q2, reaching around R311,000—5.8% for first-time buyers. This figure remains below the highs seen in 2024, but it’s definitely a trend worth observing.

SIMON BROWN: Looking at regional performance, Greater Pretoria experienced a 27% increase. Clearly, something significant is happening there; it’s not the first time we’ve seen impressive figures from Pretoria.

The Western Cape is at the forefront of building activity, which is expected, while the surge in Pretoria is somewhat unexpected. Nonetheless, both regions are seeing remarkable growth.

BRADD BENDALL: Absolutely. It’s refreshing to discuss a province outside the Western Cape. I believe the trend of moving from Johannesburg to Pretoria is fueling this growth. With a major university and a substantial government workforce, Pretoria’s infrastructure, particularly in areas like Menlyn, is really thriving. It’s certainly looking very hopeful.

Pretoria has noted a 27% increase, as you’ve pointed out, while the Western Cape leads in new construction with R4.4 billion. All signs indicate that the market is thriving.

SIMON BROWN: It certainly seems that way. Are there specific price points where we’re noticing peak activity? While we’ve touched on regional trends, perhaps we should examine whether there’s more activity among luxury home buyers as opposed to those looking for smaller one-bedroom apartments. Is there variability across different price ranges?

BRADD BENDALL: The activity between R1 million and R2 million remains strong, showing significant year-on-year growth. However, there has been a concerning decline in loans under R500,000, which have dropped by 5.7%. This presents challenges for both government and bank objectives, especially in the entry-level market, indicating there’s still work to be done.

SIMON BROWN: Yes, Calgro M3 comes to mind regarding that segment.

One final point: there’s an interesting trend concerning shifts in buyer behavior. We’ve observed an increase in building plans for renovations and expansions, making up nearly a third of total plans. While homeowners continue to buy, this data suggests many prefer upgrading their current properties rather than relocating.

BRADD BENDALL: Absolutely. This is a truly intriguing trend we’ve noticed. With decreasing interest rates, consumers seem more willing to renovate their existing homes rather than move. This often occurs in response to pricing and demand; currently, sellers are asking premium prices, which encourages buyers to consider renovations instead. This behavior aligns with historical trends that typically accompany lower interest rates. We are indeed seeing this shift, and it appears we might soon transition to a buyer’s market.

SIMON BROWN: You make a strong point. With falling interest rates and high seller prices, some buyers might be reluctant. I also wonder how this impacts businesses like Cashbuild.

We’ll conclude here. Bradd Bendall, BetterBonds National Head of Sales, thank you for sharing your insights this morning.

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