Credit Demand Rises in SA, But Property Market Still Struggles to Catch Up

Why lower interest rates aren’t sparking a property boom just yet

South Africans are borrowing more, but they’re not necessarily buying homes or investing in big-ticket assets. That’s the latest insight from May’s Private Sector Credit Extension (PSCE) data, which showed a 5% rise in overall credit demand, the highest since interest rates started coming down late last year.

But here’s the catch: mortgage advances and credit for fixed asset purchases are barely budging. That means while consumers are swiping their cards and taking on short-term loans to stay afloat, they’re holding back on major financial commitments like property and infrastructure investments.

Credit Uptick Signals Confidence, but Not in Bricks and Mortar

According to Aluma Capital, the uptick in credit demand was stronger than expected, beating forecasts of 3% and rising above April’s 4.6%. It shows growing momentum, thanks in large part to the South African Reserve Bank’s cumulative 175 basis points in rate cuts since September, with the most recent 25-point cut at the end of May.

Still, Aluma’s chief economist Frederick Mitchell says the property market hasn’t bounced back the way many hoped.

“Consumers are still grappling with high debt, stagnant wages, and the rising cost of living,” he said. “These factors have limited how quickly the benefits of lower rates filter through to fixed asset investment.”

Where the Credit Is Going: Short-Term Survival, Not Long-Term Growth

It’s clear South Africans are leaning on short-term credit to manage their finances. In May, instalment sales rose 1% month-on-month, and “other loans and advances” climbed 7% year-on-year, reflecting how households are navigating higher costs.

Mortgage advances, on the other hand, crept up by only 3.5% in May, unchanged from April. That’s a clear sign the appetite for homeownership or real estate investment is still soft, even with cheaper credit on the table.

Aluma believes stronger property activity might only materialise in late 2025, once household disposable incomes recover more fully and market sentiment improves.

Youth and Credit: Locked Out or Left Behind?

One group feeling especially left behind is South Africa’s youth. Despite contributing actively to the economy, young adults remain underrepresented in the formal credit market.

Experian’s latest Consumer Default Index (CDI) shows a 14% year-on-year improvement in default rates, but that’s largely due to tighter lending practices. For young borrowers (under 30), the CDI dropped from 7.55 to 5.76 over the past year.

According to Jaco van Jaarsveldt of Experian, this may not be the good news it seems.

“It’s more a reflection of limited credit access than improved credit behaviour,” he explains. “This demographic isn’t building credit profiles, which could delay or prevent financial independence.”

Do Young South Africans Still Want to Own Property?

Despite the barriers, there’s still a deep-rooted desire for homeownership among South Africa’s youth. Rhys Dyer, CEO of the ooba Group, says young people remain enthusiastic about buying homes, even if they’re waiting longer to do so.

Data from Lightstone backs this up. In 2023, 29.7% of all property transactions were by buyers aged 20 to 35 , down from 36% in 2019 and 41% in 2013. Of those younger buyers, 69% were first-timers.

Interestingly, adults aged 36 to 50 are now dominating the property space, accounting for 43% of purchases, with 42% of them also buying homes for the first time. This shift points to delayed financial milestones, likely due to economic challenges and affordability concerns.

The Long Road to Recovery

With inflation easing and more rate cuts on the cards, many analysts believe the tide will turn, but it’s going to take time. As Mitchell notes, “The full benefits of lower interest rates should begin to reflect in stronger asset demand from the second quarter of 2025 onward.”

But if South Africa wants to see real movement in its property and fixed asset markets, it will need more than just monetary easing. Wage growth, debt relief, and improved access to affordable, responsible credit, especially for young people are just as critical.

{Source: IOL}

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