The second monthly BetterBond Property Brief data shows that the number of applications for new home loans staged a marginal recovery in Q1 2023 but was 21% lower year on year. The number of new home loan applications has dropped nearly 6% since Q1 2020 (before the Covid-19 pandemic). This is the effect of the Reserve Bank Monetary Policy Committee raising interest rates consistently since November 2021, with resultant pressure on the economy, in general, and the property sector.
This is also hitting the first-time buyer market segment, who form the majority of all home loan applications (and have done so for the last two years). However, these have been on a downward trajectory, with their proportion of all applications going from 71% in Q1 2020 to below 64% in Q1 2023.
Supply is also affected
On the supply side, the stock of available homes for sale has been impacted by the number of new houses built (formal building plans approved by municipalities) and emigration. In recent years, supply-side housing has also been constrained by a decline in new residential buildings completed. Based on the value of homes that were built and the average price of homes, the number of new homes coming to market went from 82,300 in 2019 to 46,400 in 2022.
Housing Credit
The cost of credit has increased by more than 60% over the past 18 months on the back of interest rate rises. This will continue to dampen economic activity in our country and could keep exerting downward pressure on property purchases.
Homebuying has also been under pressure due to the loss of formal sector jobs during the Covid-19 pandemic. Although 913,000 formal sector jobs have been created since Q2 2020, when lockdown restrictions were at their harshest, the current total formal employment figure of just under 11 million is still 300,000 short of Q1 2020.
Read the full report here.
