SA housing market shifts from recovery to resilience

• Home loans granted rose 4.1% year on year and 28% compared with July 2024, signalling resilient buyer demand.
• First-time buyers are paying record prices above R1.4 million, while rising household incomes are helping support affordability.
• Higher deposits remain a hurdle, but the deposit-to-income ratio has fallen 21% from its 2022 peak for all buyers.

South Africa's residential property market is entering a new phase, shifting from post-rate-hike recovery towards greater resilience as improving affordability, rising household incomes and sustained lending activity support buyer confidence.

Despite global economic uncertainty, higher property prices and an increase in deposit requirements, the latest data suggests prospective homeowners have not retreated from the market.

The BetterBond August Property Brief shows that while home loan applications softened during July, the decline was relatively modest. More significantly, the number of home loans actually granted continued to rise.

The prime lending rate remained unchanged at 10.5% in July, following the substantial easing from its 11.75% level in September 2024. That earlier rate-cutting cycle has helped improve affordability and strengthen the housing market.

At the same time, rising buyer incomes are providing an important buffer against higher property prices and deposits. For investors and prospective homeowners, the numbers suggest the housing market has strengthened considerably from the difficult conditions experienced during the peak of the interest-rate cycle.

Housing market shows resilience

‍Stephan Potgieter, CEO of BetterHome Group Mortgage Origination and BetterBond, says the latest data reveals a market characterised by competing forces.

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"BetterBond's August Property Brief paints a picture of contrasts. Deposit requirements have become higher, as the prime lending rate has held steady, yet the drop in home loan applications in July was surprisingly muted," says Potgieter.

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Compared with July 2024, home loan application volumes were down only 1.5%, while remaining marginally above the average recorded during the previous three months.

That resilience becomes more apparent when looking at loans actually granted. In July, the number of home loans granted increased by 4.1% year on year and by a significant 28% compared with July 2024.

The figures indicate that while buyers may be navigating tougher deposit requirements, appetite for homeownership remains intact and successful access to mortgage finance continues to support transactions.

First-time buyers push into record territory‍

Higher property prices have not prevented buyers from entering the market. The average purchase price paid by first-time buyers reached a new record of just above R1.4 million in July, while the average price across all buyers remained around R1.7 million. Average house prices increased by 1.1% year on year for all buyers and by 3% in real terms for first-time buyers.

A critical factor supporting this activity has been income growth. According to BetterBond, average homebuyer incomes have increased by 14% over the past two years, helping households absorb higher property prices and financing costs.

This improving income position could become increasingly important if house-price growth accelerates.

Deposits rise, but affordability picture improves‍

Deposits remain one of the biggest hurdles facing prospective buyers. BetterBond's data shows that the average deposit requirement across all buyers increased by 9.5% year on year, although it is only 3.3% higher than two years ago.

For first-time buyers, the average deposit now represents 13.2% of the purchase price. But looking only at the headline deposit increase misses an important underlying shift.

Lower deposit requirements during the Reserve Bank's rate-cutting cycle between late 2024 and early 2026, combined with rising incomes, have substantially improved the relationship between deposits and salaries.

Since peaking in the fourth quarter of 2022, the ratio of average deposits to average annual salaries has declined by 21% for all buyers. Potgieter says this helps explain why home loan activity has remained comparatively resilient.

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"While one would expect home loan activity to be sluggish, we are seeing that buyers are successfully applying for finance, that household incomes are rising and affordability is improving in many segments of the market."

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First-time buyer loan values rise across SA‍

The improvement is also evident geographically. Average home loan values for first-time buyers have increased across almost every region over the past two years.

The Eastern Cape leads with 21% growth, followed closely by the Western Cape at 20%. Nationally, the average home loan value for first-time buyers reached approximately R1.2 million during the 12 months to July 2026.

Potgieter attributes these increases partly to the reduction in prime from 11.75% in September 2024 to 10.5%, alongside consistent growth in first-time buyer incomes.

Gauteng and the Western Cape also continue to dominate the development of new flats and townhouses, while Mpumalanga has recorded strong growth in compact new housing.

Inflation offers another encouraging signal‍

The wider economic picture also provides some support for the housing market. Recent increases in the Producer Price Index and Consumer Price Index remain less severe than those experienced during the 2022 oil-price shock, while food inflation has declined consistently since the end of 2024, reaching 1.4%.

Further normalisation in maritime oil freight could also place downward pressure on oil prices and ultimately inflation. A more benign inflation environment would be positive for household finances, but the next stage of the property cycle will depend on more than monetary policy.

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"The rate-cutting cycle has fundamentally strengthened the housing market, but the next phase of the recovery will depend less on interest rates alone and more on whether income growth can keep pace with house prices and homebuying costs," says Potgieter.

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What it means for buyers and investors

The August numbers do not suggest that every affordability challenge has disappeared.

Deposits have risen, property prices continue to increase and first-time buyers in particular are having to commit more capital to enter the market. But the underlying picture is considerably stronger than during the peak of the interest-rate cycle.

Mortgage approvals are rising, incomes have improved, the deposit-to-salary burden remains well below its 2022 peak and buyers continue to transact.

For prospective homeowners, that provides grounds for cautious optimism. For investors, it reinforces the importance of watching the fundamentals beneath headline house-price movements: affordability, income growth, lending appetite and housing demand.

South Africa's housing market may not be booming, but the latest data suggests something potentially more sustainable is taking shape. The recovery is increasingly becoming resilience.

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