By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
Housing affordability: A view from estate agents
In this piece, we explore the latest FNB Estate Agents Survey to understand their perceptions of affordability and how first-time buyer borrowing behaviour is evolving with easing monetary policy.
Growing disparity between incomes and house prices
The survey revealed a significant increase in the number of real estate agents who believe that incomes have not kept pace with house prices, despite improving consumer income data. At the start of the interest rate hiking cycle in 2H21, 24.5% of agents reported that incomes had fallen “far behind” house prices. This figure surged to 39% in 2H24, at start of the current interest rate cutting cycle, and has since risen to a disappointing 44% in 2Q25 (Figure 1). This suggests that the rising trend in house prices, which has surpassed inflation, may be offsetting real income benefits for many potential buyers. It is important to note, however, that agent views are based on a sample of potential buyers, not a comprehensive look at all consumers. This persistent affordability constraint partly explains the slow recovery in mortgage lending, even with easier financial conditions. To navigate these, buyers are increasingly gravitating toward more compact, cost-effective housing options like apartments.
Evolving first-time buyer behaviour
Another notable trend is the shift in how first-time buyers finance their home purchases. The survey initially showed a decrease in the use of 100%+ loan-to-value (LTV) mortgages, from 74% in 2H21 to 66.5% in 1H24, due to tighter lending standards. The trend has reversed, with the latest data showing a 75% reliance in 2Q25, indicating that lending standards are easing.
Furthermore, there has been a significant shift away from using unsecured bank loans as a source of funding. According to the survey, reliance on these loans, which come with higher interest rates and shorter repayment terms, rose sharply from 2% in 2H21 to 11.5% in 1H24, but has now declined significantly to 3% in 2Q25 (Figure 2). This positive development, which could have also been supported by the cash injection from the two- pot retirement withdrawals, indicates that first-time buyers are taking on less credit risk to enter the market, which is beneficial for credit market performance.
Overall, these survey results, combined with actual market data, suggest that many potential buyers remain on the sidelines, likely using this time to pay down existing debt and strengthen their financial position. The findings also show that buyers, particularly first-time buyers, are skilfully navigating persistent affordability constraints by adopting more strategic and financially responsible approaches. This behaviour is a positive indicator for both the financial well-being of new homeowners and the stability of the broader credit market. It is important to note that this survey was conducted before the latest interest rate cut and the South African Reserve Bank's (SARB) shift in long-term inflation rate preference from 4.5% to 3%. We eagerly await the 3Q25 results to see how these recent changes have impacted the market.
Week in review
Consumer inflation lifted to 3.5% y/y in July, up from 3.0% in June. Monthly pressure was 0.9%, mainly driven by electricity and core items. Core inflation was 0.4% m/m and 3.0% y/y, up from 2.9% previously. Monthly pressure was led by water and other housing services. Electricity inflation was 10.4% m/m and 10.6% y/y. Overall, utilities inflation was 7.6% m/m and 8.0% y/y - outpacing headline inflation. Average fuel prices increased by 2.6% m/m but were still 5.5% lower than in July last year. Food and non-alcoholic beverages (NAB) inflation was 5.7% y/y, up from 5.1% previously, with monthly inflation of 0.6% that was mainly from meat inflation. We see headline inflation remaining flat in August, and while it should continue rising in 2H25, it should remain below the midpoint of the target range and average around 3.5% this year.
Week ahead
On Tuesday, the leading business cycle indicator for June will be published. The leading indicator recorded another setback in May, declining by 1.3%m/m to 111.3 points, following a 0.6% decline in April. On an annual basis, the indicator slid by 0.7%, from a marginal decline of 0.1% in the previous month. The decline was broad-based across nine out of ten components, with the increase in SA's US dollar-denominated export commodity price index the only positive contributor.
On Thursday, data on producer inflation for July will be released. Producer inflation remained subdued at 0.6% y/y in June, reflecting a modest acceleration from 0.1% in May. Monthly pressure was 0.2%, highlighting upward pressure from food prices, mainly meat and meat products, fruits and vegetables, and dairy products, which was partially offset by a decline in fuel prices. Intermediate producer inflation continued to moderate, easing to 5.5% from 6.9%, following its recent peak of 8.5% in February 2025. We expect producer inflation to gradually rise in 2H25 but remain benign, averaging around 1.2% this year.
On Friday, Private Sector Credit Extension (PSCE) data for July will be released. In June, PSCE growth remained steady at 5.0% y/y. Household credit growth edged up slightly, to a still subdued 3.1% from 3.0%, while overall corporate credit growth eased marginally to 6.6%, down from 6.7% in the previous month. In the corporate sector, demand is fuelled by general loans and the real estate sector, while car finance and credit cards are driving household credit demand.
Also on Friday, the trade balance for July will be published. The trade balance recorded a surplus of R22.0 billion in June, marginally higher than the surplus of R20.0 billion in May. This was largely driven by exports of R170.7 billion, reflecting a 1.9% monthly decline, and imports of R148.6 billion, which declined by a slightly steeper 3.5%. Year- to-date, the trade balance has accumulated a surplus of R80.2 billion, slightly below the R92.0 billion surplus recorded over the same period last year.
