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Affordable first-time homes in Gauteng

Gauteng South & East Rand emerge as a haven for price-conscious first-time homebuyers

WHILE THE volume of first-time buyer home loan applications nationally has declined since the start of the current interest rate cycle, there is one area where this demographic reigns supreme: Gauteng South & East Rand.

Ooba Home Loans’ data shows that first-time homebuyers in the Gauteng South & East Rand region accounted for a robust 54% of all applications received in recent months, matching levels last seen during the record low interest rate levels of Q3 2020—at the height of the pandemic.

This has largely been driven by the relative affordability of the region, with Gauteng South & East Rand emerging as one of the most affordable housing markets in South Africa.

In fact, between the months of January and October 2023, average prices of properties purchased in these areas have shown a -3.3% decline in comparison to the properties purchased in the same period in 2022.  This is contrary to the national average, which has shown a modest year-on-year increase of 0.8% between January and October 2023.

Higher house prices in the rest of Gauteng result in lower first-time buyer activity

A comparative analysis of first-time buyer activity in the rest of Gauteng shows that the province has struggled to maintain the homebuying spike, with first-time homebuyer application levels in the Tshwane & North West Province, and Johannesburg & West Rand regions all lower than that of the national average.

This can be attributed, in part, to slight-ly higher average purchase prices in these regions observed this year, in comparison to Gauteng South & East Rand which, together with the Free State, is the only region in which the average purchase price paid by first-time buyers during the period January to October 2023 has averaged less than R1 million.

During this period, ooba Home Loans data shows a 1.17% increase in the average purchase price of homes located in Tshwane & North West Province and a 1.22% increase in the purchase price of homes in Johannesburg & West Rand.

A closer look at banks’ lending conditions in Gauteng

Johannesburg & West Rand have achieved the highest levels of home loan approval rates in the region—at 85.1% (Oct 2023), while Tshwane & North West Province continue to enjoy a steady increase in recent months—now at 84.3% (Oct 2023).

Gauteng South & East Rand have declined from a high of 83.5% in December 2022 to 79.4% in October 2023.

The dipping of approval rates reflects the impact of interest rate hikes and the rising cost of living on the stretched affordability of first-time homebuyers, who are an important source of demand in this region’s housing market.

Bargains can also be found in Tshwane

According to Lightstone, the highest number of house sales in the major metros over the past 12 months was recorded in the City of Tshwane, with 12 769 homes sold.  This exceeds one of the country’s housing hotspots, Cape Town, coming in at 10 861 homes sold.

While Gauteng South & East Rand remains the most affordable property market in the country, there are still plenty of affordably priced properties to be had nearby in Tshwane.

This is especially evident when compared to Cape Town, where just 43.4% of all homes sold in the last 12 months were priced at less than R1.5 million.  In contrast, nearly 63% of homes sold in Tshwane during that same period fell into that price band.

It is also notable that a whopping 62% of properties sold in Tshwane during the last year were for sectional title properties—the highest percentage of any major metro by a large margin.

Sectional title homes are prized by buyers, particularly first-time buyers, for their lower maintenance requirements and security advantages.  In addition, many of these sectional title sales over the last 12 months are located in new residential developments, which offer buyers the cost-saving advantages of no transfer duty requirements.

Looking ahead, it is expected that the Gauteng property market will continue to recover.  Current bank lending trends, coupled with the favourable pricing of homes, will attract the growing number of first-time homebuyers once interest rates ease.

Rhys Dyer, chief executive officer of ooba Home Loans.

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