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Trends Set to Fuel Home Loan Activity in 2025

14 January 2025 ooba Group
Rhys Dyer

Rhys Dyer

The third quarter of 2024 signalled a significant turning point for the residential property industry, generating momentum that will fuel growth well into 2025.

In October 2024, the market responded swiftly to the first interest rate cut of 25 basis points announced in September, with ooba Home Loans reporting year-on-year and month-on-month volume increases of 16% and 27% respectively.

Looking ahead, Rhys Dyer, CEO of the ooba Group speculates that with more rate cuts soon to follow, homebuying activity will strengthen further. “Spurred on by factors such as additional interest rate cuts, better economic prospects, improved affordability and more stability, we strongly believe that demand for property in 2025 will reach levels exceeding those seen in recent years.”

Dyer unpacks 2025’s projected trends as follows:

1) Bank Lending Set to Aid Market Recovery

“Despite fluctuations in the market, the country’s banks continue to exhibit consumer friendly lending behaviour,” says Dyer, pointing to December ’24 data which saw attractive discounts to the prime lending rate of prime less 0.52%, bringing the year-to-date average to prime less 0.55% (compared to the prime less 0.44% achieved over the same period in the previous year).

“In 2024, the Western Cape achieved the highest average weighted concession of -0.84%, followed by the Eastern Cape at -0.64%.”



Source: ooba Home Loans

Dyer also notes some of the highest loan-to-value (LTV) ratios witnessed in recent years.

“The national LTV ratio peaked at 86.7% in Aug '24 and has since drifted lower - ending the year at 83.6%,” he says.

“Regionally, bank approval rates were highest in the Western Cape (averaging 86.6% last year), followed by Johannesburg at 85.2% - clear indicators that these areas remain key priorities for the banks, and that they will continue to drive growth and resilience in 2025’s property market.”

2) Consumer Saving and Spending Habits in Focus

2024 saw improved financial prosperity amongst homebuyers – particularly first-time homebuyers – with more sizeable deposits being put down. “Despite a slight dip, first-time homebuyer’s deposit leveled out at 9.9% in Q4 ’24. This commendable figure highlights a sound understanding of the benefits of putting down a deposit.”

Dyer highlights some good news for those struggling to save for deposits, with the expected resurgence of zero-deposit bonds in 2025. “Overall, deposits are shrinking, potentially influenced by stronger lending activity from banks,” he says.

“While zero-deposit applications currently sit at 53.7% (Q4 ’24) – down by 13.8 percentage points from its peak in June ’20, we do expect to see the banks leverage these as a means to support keen homebuyers.”

3) First-Time Homebuyer Growth Set to Accelerate

The demand from first-time homebuyers continues to gain momentum, with home loan applications rising from a mid-year low of 45.2% to 46.9% by December ‘24.

"This data indicates that the first-time homebuyer segment is poised for a strong year, primarily fuelled by lower interest rates," says Dyer.

Analysing regional trends, Dyer adds: "Last year, our data revealed that demand was highest in the three most affordable regional housing markets: Free State (57.9%), Mpumalanga (54.0%), and Gauteng South & East (52.3%). These were the only regions where first-time homebuyers represented more than half of all applications received."

Notably, the average price paid by first-time homebuyers rose to R1.19 million in December ’24, a 5.2% year-on-year growth. "The Western Cape remains a hotspot for this segment, with the average purchase price climbing by an impressive 9.3%, followed by the Free State with a 5.8% increase," Dyer notes.

4) Western Cape Semigration Frenzy Tapers Off

The latest data released by Stats SA revealed a notable decline in approved building plans for the City of Cape Town, with a high concentration of high value activity taking place in sought-after coastal towns like Knysna.

“Knysna, and other smaller, more affordable coastal towns like George, are on a sharp upward trajectory that is set to gain momentum in 2025.”

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