Is this the best time to buy a house?

With interest rates at 47-year lows and house prices expected to drop this year for the first time in a decade, it could be a smart move to buy a residential property after the lockdown.

Industry players say though the Covid-19 pandemic will no doubt cause increased financial stress for many, the flipside is that the SA housing market now offers more favourable buying conditions than it has in years.

House price growth has slowed to its lowest level in nearly a decade - to 2.8% in March, from a peak of 8.2% in 2014, according to FNB. In addition, it's easier to qualify for a mortgage as banks more aggressively vie for a share of SA's R1.5-trillion (according to SA Reserve Bank mortgage advance figures) home loan pie.

Rhys Dyer, CEO of mortgage originator ooba, points to a noticeable uptick in home loan approval rates in the first quarter. In fact, banks' approval rates on applications for 100% home loans with no deposit required were at levels last seen more than 12 years ago, he says.

Banks have also steadily relaxed their cash deposit requirements as a percentage of the purchase price in the 12 months to end-March, from an average 14.2% to 9.8%.

Equally encouraging is that the average interest rate ooba achieved for homebuyers from banks in the first quarter was 0.03% below prime. That compares with prime plus 0.11% a year earlier.

Though Dyer concedes that it is difficult to predict how quickly the market will bounce back, given that the economy is likely to shrink sharply in the second quarter, he says banks are likely to remain competitive in their bid to increase market share.

Housing demand should be further boosted by increased affordability levels. "We expect there to be attractive deals in the market, as sellers who have been holding out for better offers are forced to reduce prices," says Dyer.

He adds that the two percentage-point drop in the prime interest rate in March and April to 7.75% - the lowest level since 1973 - means it will in some instances become cheaper to buy than to rent. That's particularly true for the lower end of the market, as there's no transfer duty on houses that sell for less than R1m.

The cost savings that higher-income earners will make on bond repayments due to the two rate cuts could also prompt an uptick in buy-to-let purchases, if investors start channelling the savings on their first mortgage into paying off a second loan on a rental property. For example, someone with a home loan of R3m will save R4,000 a month, given that their bond repayments will drop from about R29,000 to R25,000 (on a 20-year loan at an interest rate of 10%).

For lower-income earners who are employed and earn fixed salaries, the key benefit of lower interest rates is that they will qualify for a larger home loan than before.

Gerhard Kotzé, MD of RealNet Holdings estate agency group, says: "The household income required to qualify for a R500,000 home loan has declined from about R19,300 in early January to R16,400 currently."

Similarly, the monthly income required to buy a house of R1m has dropped from nearly R40,000 to R32,800.