Key factors still in favour of first-time buyers

The average home purchase price among first-time buyers has climbed steadily over the past two years from R612 000 to R652 000, and yet it has actually become more affordable to enter the property market.
For one thing, says Shaun Rademeyer, CEO of SA’s biggest mortgage originator, BetterLife Home Loans, the average percentage of the purchase price required by the banks as a deposit on first-time purchases has shrunk from 8,4% to 6,8% - which translates to a cash saving of around R9000.
“Secondly, the transfer duty threshold was raised earlier this year from R600 000 to R750 000, which translates into further savings for most first-time buyers of up to R4500. And thirdly, wages have generally risen faster than house prices over the past two years, so monthly home loan instalments as a percentage of income have grown smaller.”
Taken together, he says, these factors have strongly underpinned first-time buying despite the sluggish economy and the rising cost of living, to the point where such buyers still account for more than 46% of the home loan applications received by BetterLife Home Loans and for 40% of all loans granted.
“This picture could however change quite rapidly if the Reserve Bank goes ahead with further interest rate increases this year. Having no existing property to sell in order to help raise a deposit, first-time buyers are much more credit-dependent than repeat buyers, and usually quick to opt out of the market when rates - and monthly mortgage repayments - start to rise.
“In addition, they will often find it more difficult to qualify for a loan in these circumstances, especially if they already have other debt repayments to make every month.”
For the moment, though, says Rademeyer, the demand for residential property continues to grow across all sectors of the market, as reflected in 2,1% increase in the overall number of home loan applications in the 12 months to end-September.  
The BetterLife Home Loans statistics, which represent 25% of all residential mortgage bonds being registered in the Deeds Office, also show a year-on-year increase of 2% in the total number of bond approvals, and a 15,7% drop in the number of applications that were declined outright.
“Nevertheless, the figures continue to make it clear that prospective buyers have a much better chance of their loan application being approved if they apply through a reputable mortgage originator such as BetterLife Home Loans. They reveal that of the 50 000 home loan approvals that we secured in the past year, more than half – or around 26 000 - were initially declined by at least one bank before being ‘rescued’ by us and approved by a different bank.
“And it is our ability to do this that enables us to consistently achieve a 75% approval rate, as opposed to an industry approval rate which we now believe to have fallen back below 50%.”

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