The past two years' interest rate increases and rocketing house prices have seen the proportion of first-time buyers halve to 16percent, First National Bank's (FNB's) Residential Property Barometer for the second quarter showed.
The proportion of first-time buyers hit a high of 32percent in the first quarter of 2005.
Since then, interest rates have risen by 2,5percent, with the Reserve Bank's Monetary Policy Committee expected to raise interest rates by another 0,5percent on Thursday.
The National Credit Act came into effect on June 1, which applied to the last month of the quarter.
FNB's survey of estate agents found the new legislation had created a huge barrier for young families trying to buy their first home.
Estate agents polled said three out of four houses were being sold for less than the asking price, which was the highest ratio since FNB launched its quarterly survey.
FNB's barometer showed lower-priced houses had recorded the highest growth rate, ranging from 25percent in Durban to 15percent in Johannesburg. Mid-priced houses (between R601000 and R1million) rose from 12percent in Cape Town to 14percent in Johannesburg. Growth in premium houses was 5percent in Johannesburg and 7percent in the other major cities.
House prices rose the fastest in Polokwane and the slowest in Margate. Polokwane houses were 26percent more expensive than they were during last year's second quarter while Margate's prices only appreciated by 4percent. Coastal towns dominated by holiday homes were hardest hit by higher interest rates.
FNB Property Strategist John Loos said there was an evident downward cycle and this year the property market would probably experience its worst activity in a decade.
"I think we are on a way down for some time, and this should remain the same until the first quarter of 2008."