BetterBond
Lower interest rates aren’t just helping first-time buyers; they’re also inspiring homeowners to invest in their current properties. BetterBond’s August Property Brief shows that building plan approvals for home additions and alterations are on the rise, up from 25.4% in 2016 to 31.5% so far this year. Many buyers who had thought about moving are choosing to upgrade their homes instead.
Meanwhile, FNB reports that approvals for new flats and townhouses are down 21% year-to- date. There is a growing demand for sectional title properties offering lock-up-and-go convenience and good value, so supply constraints may well push up prices in this popular segment.
The month in numbers
- 14% QOQ increase in the number of home loan applications
- 5.8% YOY increase in average deposit for FTBs
- 7% YOY increase in the share of loans for houses above R3 million
- R4.4 billion – value of houses and flats built in the Western Cape from Jan to July 2025
BetterBond index of home loan applications
Following a disappointing Q2, when the number of home loan applications declined marginally on a QOQ basis, July surprised somewhat on the upside, with a hefty QOQ increase of 14% and a YOY increase of 12%.
In the process, the number of home loan applications reached its highest level since Q3 2022, when the high interest rates were starting to limit the affordability of buying a home.
The BetterBond index of home loan applications is now only 8% lower than in Q3 2022. Although the latest interest rate cut will only influence the August data, it seems clear that the demand for investment in residential property is picking up on the back of a lowering of the prime rate from 11.75% in September last year to 10.5% at the end of July.
Average home purchase price
During July, the average home purchase price for all buyers reached a new record high, breaching the R1.6 million mark for the first time and recording a YOY increase of 2.1%. The interest rate cutting cycle is playing a key role in the resurgence of property market indicators, with the average home price for first-time buyers (FTBs) also reaching a new record high in July, namely R1.3 million. Significantly, both the QOQ and YOY increases in home prices for FTBs managed to outpace the current inflation rate of 3% during July.
Average home prices are still below the levels recorded in 2022, before interest rates rose to a 15-year high, but any further lowering of the prime rate will undoubtedly start shifting the homebuying activity towards a sellers’ market.
Average deposit for home purchase
One of the few downsides emanating from the homebuying activity in July was the sudden reversal of the downward trend in the deposits required by the banks. After declining by 17% YOY during Q2 2025, the average deposit for FTBs increased to R188,000 in July, representing a YOY increase of 5.8%.
For all buyers, the average deposit during July amounted to R311,000, which was a hefty increase of 14% from the level required during Q2 2025. Fortunately, the average deposit requirements for July remained below the record highs recorded at the beginning of 2024. Hopefully, the recent drop in the prime rate will help slow the growth of credit impairments at South African banks and curb the recent rise in deposit requirements
Loan approval ratio by region (12 months to April 2021 and 2025)
It is concerning that demand for lower-priced homes is not matching the activity seen in higher-priced segments, as reflected in shifts in the share of home loans granted across price bands.
During the past 12 months, the share of the lowest price bracket (below R500,000) declined by 5.7%, while the share of loans awarded to houses priced above R3million increased by 7%.
During the past 12 months, the most active price bracket was for homes costing between R500,000 and R1 million, with the next level (priced between R1 million and R1.5 million) in second place. Combined, these two price brackets accounted for 54% of all home loans awarded.
Read the full report here
