What are first-time buyers paying for a home in SA?

CEO Rudi Botha says the company’s latest statistics, which represent 25% of all residential bonds being registered in the Deeds Office, also show that there has been an 11% increase in the total value of bonds approved during the 12 months to end-May.

“In addition, there has been a 7.3% increase in the total value of bonds formally granted, while the average percentage of purchase price being paid as a deposit has dropped during this period from 21% to 19.5%,” he says.

“This reflects the banks’ current eagerness to increase lending to home buyers and is echoed in the latest figures from the Reserve Bank, which show a 3.3% increase in the value of outstanding household mortgages in the 12 months to end-April, to a national total of R932 billion.”

For first-time buyers, Botha says the average size of bond granted has risen 11.2% in the past 12 months to R739 000, while the average percentage of purchase price required as a deposit has dropped slightly from 12% to 11%.

“At the same time, however, high demand and the slow pace of supply in this sector of the market has driven the average home price up by 11%, which means that the actual amount of cash required as a deposit has gone up by almost 6%, and we have seen the percentage of home loan applications coming from first-time buyers shrink from 47.5% to 46% as a result,” says Botha.

“It is also worth noting that the average home price currently being paid by first-time buyers is, at R831 000, getting close now to the R900 000 mark at which transfer duty becomes payable. If it crosses that threshold, such buyers will have to save even more cash before they are able to enter the market.”

Currently, Botha notes the average deposit amount being paid by home buyers aged 20 to 30 is R88 000, and the average being paid by those aged 30 to 40 is R150 000. The average age of first-time buyers is 34.

“Meanwhile, although we continue to obtain approval now for more than 80% of the applications we submit to the banks, more than half (51%) of those approvals are for applications that we have ‘rescued’ after they have initially been declined by at least one lender,” he says.

“This underscores the value of applying for your home loan through a reputable originator, which will not only give you a much better chance of being approved for a loan, but by submitting your application to all the major banks will also ensure that you get a loan at the lowest possible interest rate.”

Botha says this is extremely important because even a small rate concession can make a significant difference to the monthly bond repayment - and to the overall cost of the property over the 20-year life of the bond.

“For example, the borrower who obtains a R1 million loan at an interest rate of 10.5% instead of 11% will pay around R300 less per month, and still stands to save more than R80 000 on the total cost of the property,” he says.

article courtesy Property 24 & Betterbon