Bank Pioneers surge in Mortgage Bond approvals as property demand rebounds

The South African residential property market has faced significant challenges this year, with a notable decline in home loan applications. As interest rates rose to curb inflation, the housing sector saw a drop in buyer activity, resulting in muted growth across the real estate landscape. Yet, Standard Bank's outlook offers a glimmer of optimism as we anticipate a more robust recovery ahead. This is according to Toni Anderson, Head of Standard Bank Home Services.

Current Market Conditions: A Snapshot

Our data highlights a stark contrast between the pre-pandemic home loan market and the current climate. In 2019, the market averaged R14 billion in home loans monthly. This figure surged to around R20 billion per month in 2021 and 2022, driven by first-time buyers capitalizing on stable housing prices and low-interest rates. Home loan registrations significantly exceeded pre-pandemic levels from the second half of 2020.

However, by mid-2023, the South African Reserve Bank's interest rate hikes began to temper the market. This led to a notable decline in home loan applications, with the average dropping back to R14 billion per month in 2023, a trend that has continued into 2024. The reduction in buyer activity is largely attributed to affordability constraints and low consumer confidence, as evidenced by feedback from real estate agents.

The Turning Tide: Standard Bank’s Forecast

Despite the downturn, Standard Bank maintains a cautiously optimistic outlook. Our modest 1% growth in the lending book for the first half of 2024 reflects our continued support for aspirant homeowners, much like our approach during previous crises such as the global financial crisis and the COVID-19 pandemic. We have also focused on supporting current homeowners to help them remain in their properties.

Looking ahead, several factors could stimulate a revival in home loan demand. We forecast that the South African Reserve Bank will begin cutting the repo rate this year, with an initial 25 basis point cut expected in September, followed by additional cuts in 2025. This is supported by recent inflation data, which shows a decrease from 5.1% in June to 4.6% in July, aligning closer to the SARB’s target of 4.5%. Such cuts are likely to boost buyer confidence and spur a rebound in loan applications.

Historically, the residential property market has demonstrated resilience and recovery after downturns. With the political landscape stabilizing and positive economic indicators, including recent currency performance, there is potential for renewed stability. We anticipate that these factors will foster a recovery in the residential property market in the medium to long term.

In conclusion, while the current downturn has been challenging, it is likely a transitional phase rather than a long-term trend. We expect renewed interest and activity in home loan applications as market conditions improve.

‍