Property market easier for first-timers

The average home purchase price in South Africa increased by 5.6% in the 12 months to end-January, to R930 000. 

Fortunately, things have generally been much easier for first-time buyers - while the average first-time home price also increased in the past 12 months to R651 000, the banks were, in most cases, prepared to finance about 91.5% of that.

This is according to the latest statistics from BetterBond Home Loans. These figures also show that the average home loan granted during this period covered only 83% of the purchase price, meaning that most home buyers still had to come up with a large sum of cash in order to complete their transactions. 

Fortunately, things have generally been much easier for first-time buyers. 

This is according to BetterBond CEO, Shaun Rademeyer, who says while the average first-time home price also increased in the past 12 months to R651 000, the banks were, in most cases, prepared to finance about 91.5% of that. 

He says this meant that the average first-time buyer only had to save a deposit of around R55 000, and this helped BetterBond to maintain an average bond approval ratio of 73% in the 12 months to end-January. 

In addition, the group’s statistics show that the lower deposit requirements also helped to ensure that about 41% of the 37 000 home loans formally granted through BetterBond in the past year went to first-time buyers, even though they only accounted for 28.5% of the total value of all the properties bought with these loans. 

Rademeyer says in the previous 12-month period, first-time buyers accounted for 43% of the formally granted loans and 30% of the total value of properties purchased. 

However, given the fact that there were two interest rate increases in 2014 and that consumers also had to deal with steep fuel, food and utility cost increases, they think the picture is still good for such buyers. 

“First-time buyers are generally young people with less ability to cope financially with rising interest rates and living costs, and they tend to give up on home purchases much more easily than repeat buyers.” 

So the fact that so many of them stayed in the market during 2014 indicates the strength of demand in this sector, and bodes well for the future of the market as a whole as they outgrow their first homes and start to upgrade, he says. 

Rademeyer says further encouraging signs for the residential property market in the coming 12 months is the fact that the total number of home loan applications submitted to the banks by BetterBond was 3.4% up year-on-year at the end of January. Also, the global oil price decline will probably enable the Reserve Bank to delay any further interest rate increases until at least the second half of 2015. 

In short, he says there are currently more prospective buyers in the market, a greater percentage of whom are likely to be able to qualify for home loans.

article courtesy of Property 24