Would-be first-time home buyers are urged to buy now as there couldn’t be a better time to enter the property market.
Margate, Property, "For Sale"
For a start, he explains that despite the fact that the average home purchase price among first-time buyers has climbed steadily in the past four months from R582 000 to R621 000, and is currently also 5 percent higher than at this time last year – home ownership has actually become more affordable, thanks to the easing of credit restrictions and of course, an interest rate cut.
Rudi Botha, chief executive officer of BetterBond notes that the residential property market has reached a stage that occurs only very rarely, in which several major factors are all aligned in favour of first-time buyers.
He says this is clearly evident in BetterBond’s latest statistics, which represent 25 percent of all residential mortgage bonds being registered in the Deeds Office and include applications to, and bond grants from, all the major lending banks in South Africa.
For a start, he explains that despite the fact that the average home purchase price among first-time buyers has climbed steadily in the past four months from R582 000 to R621 000, and is currently also 5 percent higher than at this time last year – home ownership has actually become more affordable, thanks to the easing of credit restrictions and of course, an interest rate cut.
“At the moment, about four out of every 10 home loans approved are 100 percent loans and most of these are going to first-time buyers, including those in the affordable sector.”
Botha says the average percentage deposit required by first-time buyers who don’t manage to secure a 100 percent loan has declined from 11.5 percent of the purchase price to 9 percent.
So effectively, the average deposit amount for such buyers has fallen to around R56 000 compared to R71 000 earlier this year – even though home prices are higher, he says.
“This relief now combined with lower home loan interest rates since the Reserve Bank cut the repo rate by 0.5 percentage points in July, is further increasing affordability levels for first-time buyers.”
For example, at the current standard home loan interest rate of 8.5 percent, the minimum monthly repayment on a bond of R621 000 (assuming a 100 percent loan) is R5389, compared to R5587 at an interest rate of 9 percent.
Lower interest rates do of course make it easier for would-be buyers to qualify for loans in the first place, he says.
Botha says these developments are already gaining the attention of keen buyers eager to enter the property market.
“First-time buyers accounted for 42 percent of all home loan applications in July compared to 37 percent four months ago, and the percentage of loans being granted to first-time buyers has at the same time risen from 35 to 39 percent,” he adds.