Johannesburg – South Africa’s housing market proved resilient in 2020 in the face of the Covid-19 pandemic, aided in large part by low interest rates.
This is according to data from FNB’s Property Barometer.
FNB senior economist Siphamandla Mkhwanazi said that industry-wide data continue to show robust home-buying activity.
“In fact, 2020 is set to register the highest volume of mortgage approvals in over a decade. This is despite relative caution from lenders; approval rates were lower in 2020 compared to 2019,” said Mkhwanazi.
“Activity is propelled by lower interest rates, attractive market pricing, lower transfer duties and the changing housing needs due to the pandemic. The improved affordability made buying property more attractive than renting.”
He further said the resilience in the sector was also assisted by the fact that job losses were more prevalent in low-paying occupations and for those employed on a non-permanent basis, who would generally not afford to buy property.
The South African Reserve Bank last year slashed interest rates by 300 basis points to 3.5% in response to the impact of the pandemic on households and the economy.
While house prices have continued to show growth this year, on a real or inflation adjusted basis they remain in negative territory, reflecting an ongoing price correction in line with the persistently subdued national economic growth rate.
The Reserve Bank’s monetary policy committee opted to keep interest rates unchanged at 3.5%. For the third consecutive meeting, two members of the committee preferred a 25 basis points cut while three preferred to keep rates on hold.
The Steel and Engineering Industries Federation of Southern Africa chief economist Chifipa Mhango said the decision of the Reserve Bank to hold the repo rate will relieve pressure on consumers.
“Keeping the repo rate at current low levels provides the platform to kickstart the economy, drive consumer spending and create a conducive environment for more investment into the economy,” he said.
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