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More buyers with more money boost property market

The average home purchase price in SA increased by 5,6% in the 12 months to end-January to R930 000, according to the latest statistics from BetterBond Home Loans, SA’s leading mortgage origination group.
 
These figures also show that the average home loan granted during this period covered only 83% of the purchase price – meaning that most homebuyers still had to come up with a large sum of cash in order to complete their transactions.
 
“Fortunately, however, things have generally been much easier for first-time buyers,” says BetterBond CEO Shaun Rademeyer. “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 meant that the average first-time buyer only had to save a deposit of around R55 000 – and that 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, 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 purchased with these loans.
 
“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, but 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, we think the picture is still very good for such buyers,” Rademeyer says.
 
“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.”
 
Further encouraging signs for the residential property market in the coming 12 months, he says, are 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, and that 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, there are currently more prospective buyers in the market, a greater percentage of whom are likely to be able to qualify for home loans.”


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