Homeowners Rescued from Thousands in Yearly Payments as 2025 Witnesses the Return of Housing Demand Due to Rate Decreases
South Africa Sees Increase in First-Time Homebuyer Activity Following Interest Rate Cuts
Interest rate cuts by the South African Reserve Bank have led to a modest increase in first-time homebuyer activity, according to Rhys Dyer, CEO of the ooba Group. The second consecutive reduction in the repo and prime lending rates by 25-basis points has made borrowing costs 1.25% lower than they were a year ago, encouraging more young buyers to enter the market.
In Q2 '25, first-time homebuyers spent 3.5% more on homes year-on-year, with the average first-time homebuyer deposit decreasing by 1.9% compared to the same quarter in 2020. The average deposit for first-time homebuyers in Q2 '25 was 10.4%, a significant increase compared to Q2 '20 at 8.45%.
The demand for homes is building in light of the stable, lower interest rate environment. In Q2 '25, ooba Home Loans saw an 11% year-on-year increase in home loan applications and a 18.5% increase in the total value of these applications. The market's response to the recent rate cuts has been positive, and Dyer expects this trend to continue.
Dyer believes that these lower deposit figures are reinforced by strong bank lending activity, including attractive incentives like zero-deposit loans and high discounts to the prime lending rate. He also suggests that there is still scope for a further reduction in the interest rates, given South Africa's current economic outlook, with inflation remaining at the lowest levels seen in four years (currently 3%) and the country benefitting from a series of petrol price cuts, with another anticipated in August.
Young South Africans are adapting creatively to affordability constraints. A 4% increase in first-time homebuyer activity in the 33-43 age bracket and a 10% increase in the 43-plus bracket in 2024 indicate heightened activity following interest rate changes. First-time buyers are exploring alternative purchase strategies such as joint ownership ("houses before spouses") and buy-to-let investments.
The growth in the buy-to-let segment, particularly in regions like the Western Cape, where “rentvesting” (buying to rent out while renting own accommodation) has gained popularity, is another trend observed. First-time buyers purchasing buy-to-let properties increased by 4% in 2024, leveraging favorable financing conditions post-rate cuts.
Women are notably influential in the first-time buyer market, owning nearly 60% of residential properties and outnumbering men among first-time purchasers, reinforcing a demographic shift in buyer profiles. Banks are actively supporting young buyers with tailored products and guidance, recognizing the need to enable homeownership despite economic headwinds and the legacy of higher rates before the cuts.
In summary, recent interest rate cuts have stimulated nuanced growth in first-time homebuyer activity in South Africa, with buyers adapting creatively to affordability constraints by forming co-buying partnerships and investing in rental properties. Despite lingering market pressures, homeownership remains a key path to generational wealth for many young South Africans.
- The recent decrease in interest rates by the South African Reserve Bank has led to an 11% year-on-year increase in home loan applications and a 18.5% increase in the total value of these applications at ooba Home Loans, indicating a positive response from the market to the interest rate cuts.
- First-time buyers are exploring alternative purchase strategies such as joint ownership and buy-to-let investments, as the growth in the buy-to-let segment, particularly in regions like the Western Cape, suggests a trend where young South Africans are creatively adapting to affordability constraints.
- Women are playing a significant role in the first-time buyer market in South Africa, owning nearly 60% of residential properties and outnumbering men among first-time purchasers, highlighting a demographic shift in buyer profiles that banks are recognizing and supporting through tailored products and guidance.
