During the COVID-19 pandemic, many prospective homebuyers left the country’s economic hub in search of coastal homes and added lifestyle benefits, however, the latest data shows encouraging signs of recovery in Gauteng’s residential property market. This is according to Gavin Lomberg, CEO at ooba Home Loans.
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“There are strong signs pointing to the ongoing recovery of Gauteng’s property market, particularly Tshwane, which has registered notable improvements in the average purchase price, first-time homebuyer demand and the investment property category,” according to Gavin Lomberg, CEO at ooba Home Loans.
Lomberg points to value for money as a key driver in Gauteng’s improved outlook. “In August 2024, ooba Home Loans pinned the average property purchase price in the Western Cape at R1.94 million – a price point that many prospective owners simply cannot afford,” he says. “One could speculate that those currently renting through the “higher for longer” interest rate environment, may now feel compelled to take advantage of the recent interest rate cut – likely the first of many – and will opt for areas (and regions) where they can get the most value for money.”
“Despite the uptick in demand for homes in the Western Cape in recent years, Gauteng remains the economic heartland of South African economy and will thus continue to attract a larger percentage of the country’s working population – particularly young employees (and future first-time homebuyers).”
Factors driving Gauteng’s performance
According to Lightstone, Gauteng remains South Africa’s largest housing market – accounting for 34.7% of the country’s 7.1 million homes and 37.3% of the total R7 trillion in value. Johannesburg is currently the largest metro housing market within the region.
Lomberg outlines key trends driving resilience in Gauteng’s property market as follows:
Affordability comes out on top
Lomberg shares that the affordability of properties in Gauteng cannot be disputed. “According to Lightstone, 41.4% of home loan applications currently received are for homes valued at R800,000 and less while a further 29.8% are valued within the R800,000 – R1.5 million bracket.”
“Given that the average purchase price paid by first-time homebuyers nationally was R1.15 million in Q2 ’24, Gauteng’s housing market represents an attractive proposition for potential homebuyers.”
Purchase prices on the rise
Lomberg shares that the average purchase price in Gauteng South & East has surpassed expectations, increasing by 7.6% from December ’23 to August ’24 with an average purchase price paid of R1.16 million in August 2024.
“The average price paid in Tshwane has also strengthened from a low of R1.41 million in December ’23 to a high of R1.60 million in August ’24 – a healthy increase of 13.4%.”
In contrast, prices paid in Johannesburg have strengthened marginally in recent months, rising to R1.44 million in August – up from a low of R1.33 million in March ’24. “This is encouraging to see as it paints a picture of resilience and we have no doubt that as rates decrease, more homebuyers will come to the fore.”
First-time homebuyers will rise again
Source: ooba Home Loans
Lomberg shares that first-time homebuyers were an important source of demand during the recent housing boom but have since been largely sidelined by the interest rate hikes and tough economic conditions. “Yet demand from first-time homebuyers across Tshwane and Gauteng South & East are extremely encouraging to see and we expect these figures to rise as interest rates drop.”
Lomberg believes that Tshwane will be Gauteng’s first major metro to register a positive real (inflation adjusted) increase in first-time homebuyer house prices. “This is however reliant on whether the average price paid continues to recover and inflation continues to soften as currently forecast.”
Gauteng investment demand elevated
A key development in the local property market in recent years has been the growth in demand for investment properties.
“While the Western Cape has been the primary focus among investment homebuyers, demand across Gauteng’s three major metro housing markets are currently elevated compared to pre-pandemic levels,” says Lomberg.
Looking ahead, Lomberg is thrilled by the prospect of growth and recovery in the country’s largest residential property market. “The affordability of properties on offer combined with reduced interest rates and competitive lending by the banks make now the opportune time to invest.”
“The first interest rate drop in September 2024 marked the start of the rate cutting cycle and we urge potential homebuyers to take advantage, keeping in mind that by the time that their home is officially registered, there may very well have been a further rate cut.”
