Property deposits soar in KZN with the highest average deposits in SA

Property deposits in KwaZulu-Natal catapult as the province has the highest average deposits in the country for Q1:2024. Picture: Freepik

Property deposits in KwaZulu-Natal catapult as the province has the highest average deposits in the country for Q1:2024. Picture: Freepik

Published May 23, 2024


Property deposits have sky-rocketed in KwaZulu-Natal, according to Jackie Smith, head of Buyers Trust, a subsidiary of ooba.

KZN went from having the fifth highest average deposits in Q1:2023 to having highest average deposits in Q1:2024 at an average size of 12.8% of the purchase price.

Following closely behind is the Eastern Cape, with an average deposit size of 11.2% and Mpumalanga, with an average deposit size of 10.6%.

“It’s interesting to note that income growth from home loan applicants in KwaZulu-Natal and the Eastern Cape has vastly outpaced House Price Inflation (HPI) in these regions,” Smith said.

“With more affordable properties on the market, affluent home buyers can afford to finance a greater portion of their purchase upfront.”

According to Smith, it is the opposite for Mpumalanga where HPI is recorded at 9.5% in Q1:2024, while average applicant incomes have grown by a mere 6.4% for the same period.

“Lower income applicants are viewed as being higher risk by lenders and may be required to prove that they can afford to put down a sizeable deposit in order to be approved for a home loan,” Smith said.

Smith said that deposits give home buyers greater equity in their home immediately. They can also increase the chances of home loan approval and help secure a better interest rate from the banks.

“By putting down a deposit, a deposit has demonstrated their ability to save and finance a portion of their purchase, lowering their risk profile in the eyes of the banks and giving the buyer more leverage,” Smith said.

Regions where deposits are below the national average

According to Smith, the regions where property deposits are lower than the national average of 7.3% are Johannesburg and West Rand; the Western Cape; Pretoria and North West; and Limpopo.

“With the Western Cape boasting the second highest HPI in the country, as well as the highest average rental costs, it’s no wonder that cash-strapped buyers in the region may have very little left over to put towards a deposit, at an average of 5.6% of the purchase price, down 2.2% year-on-year,” Smith said.

The biggest year-on-year decline in average deposit sizes belongs to Limpopo. Deposits in the province went from a 12.8% of the purchase price in Q1:2023 to the current average of 5.4%.

The 7.4% decline could be attributed to home buyers in the region buying more expensive homes, as home loan applicant income growth in Limpopo is the second highest in South Africa.

Smith said: “The more expensive the home, the smaller percentage of the deposit in relation to the purchase price.”

Lowest deposits in the country was in the Pretoria and North West region, where the average deposit size comprises 4.5% of the purchase price.

“This figure is startlingly low, but still represents a 2.2% increase from the previous year,” Smith said.

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