South Africa’s housing market has turned a corner, moving from recovery to resilience as property demand remains high despite rising prices and increased deposit requirements. “BetterBond’s August Property Brief paints a picture of contrasts.
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Deposit requirements have become higher, as the prime lending rate has held steady, yet the drop in home loan applications in July was surprisingly muted,” says Stephan Potgieter, CEO of BetterHome Group Mortgage Origination and BetterBond.
“Compared to the volume of home loan applications in July 2024, the decline was only 1.5% – and applications were still marginally higher than the average for the previous three months.”
Positive home loan activity
Although rising house prices are having some impact – with the average price paid by first-time buyers increasing year on year – buyers are still making the most of opportunities to invest in property. In July, the number of home loans granted increased by 4.1% year on year and by a significant 28% compared with July 2024.
Average house prices for first-time buyers hit a new record high in July, increasing to just above R1.4 million, while remaining steady at around R1.7 million for all buyers. Average house prices have increased by 1.1% year on year for all buyers and by 3% for first-time buyers (in real terms), supported by higher levels of affordability for loan repayments and consistent increases in average homebuyer incomes.
Although the banks have been “playing yo-yo” with deposit requirements in response to changing inflation and interest rate expectations, homebuyers have also enjoyed consistent salary increases, says Potgieter. According to the August Property Brief, average buyer incomes have increased by 14% over the past two years.
Deposit requirements
BetterBond’s data shows that the average deposit requirement for all buyers is up 9.5% year on year, although it is now only 3.3% higher than it was two years ago. For first-time buyers, the average deposit is equivalent to 13.2% of the average purchase price. However, the longer-term affordability picture is more encouraging. The lower deposit requirements that accompanied the Reserve Bank’s rate-cutting cycle from late 2024 to early 2026, together with rising incomes, have contributed to a decline in the ratio of average deposits to average annual salaries. Since reaching a peak in the fourth quarter of 2022, this ratio has declined by 21% for all buyers. “So while one would expect home loan activity to be sluggish, we are seeing that buyers are successfully applying for finance, that household incomes are rising and affordability is improving in many segments of the market.”
Regional growth
Home loan values have also increased for first-time buyers across almost all regions, with the Eastern Cape recording a 21% increase over the past two years, followed by the Western Cape at 20%. The national average home loan value for first-time buyers was R1.2 million in the 12 months to July 2026. Potgieter says these elevated growth rates can be attributed to the decline in the prime lending rate from 11.75% in September 2024 to the current 10.5%, together with consistent increases in first-time buyers’ average incomes.
Looking ahead, the broader economic environment also offers some encouragement. The latest increases in the Producer Price Index and Consumer Price Index have not yet been as severe as those experienced during the 2022 oil price shock. Food price inflation has also declined consistently since the end of 2024, reaching 1.4%. A normalisation of maritime oil freight could place further downward pressure on oil prices and, in turn, inflation.
“The rate-cutting cycle has fundamentally strengthened the housing market, but the next phase of the recovery will depend less on interest rates alone and more on whether income growth can keep pace with house prices and homebuying costs,” concludes Potgieter.
For prospective homeowners, particularly first-time buyers, there is cautious optimism. The market is healthier, lending remains positive and incomes are supporting affordability, but careful financial planning remains essential as property prices and deposit requirements continue to fluctuate.
