Properties less affordable for first-time buyers

The average price being paid by first-time home buyers has increased by R145 000 in the past 12 months, and the average home loan repayment by almost R1 000 a month, despite the interest rate cut in July.

"This means fewer buyers can afford mortgage repayments and indicates that the window of opportunity for them to become home owners is closing," says Rudi Botha, chief executive of BetterBond mortgage originator.

BetterBond's monthly statistics represent a quarter 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.

The statistics show that the average percentage of purchase price required by first time buyers as a deposit has remained at about 12 percent for the past year, he says. But since the average price has risen, so has the actual rand amount of the deposit, which now stands at about R81 000, compared with R64 000 i n November 2011.

The BetterBond statistics show that the average home price currently being paid by all buyers is R916 000, compared with R834 000 in November 2011, with the average deposit required being 18 percent of the purchase price.

"Higher prices, of course, mean that buyers also need bigger home loans - and higher household incomes to qualify. These days, the average first time buyer requires a household income of about R17 000 a month, compared with about R14 000 last year.

"But even that might not be enough. The rising costs of food, transport, electricity and other necessities have really eaten into household disposable incomes in the past year, leaving many aspirant buyers without sufficient 'spare' cash, in terms of the National Credit Act, to afford a monthly home loan repayment."

As yet, demand has not slowed, with first-time buyers still accounting for about 40 percent of all mortgage applications, but the percentage of loans being granted to such buyers has dropped from 39 percent in November 2011 to 36 percent at present, with the rest going to repeat buyers and borrowers who are improving their existing homes.

Botha says the overall level of mortgage lending is still only about 35 percent of what it was at the height of the last boom - and is not likely to increase until at least 2014.

"To qualify for home loans, prospective buyers now need to lower their household debt levels - by cutting spending to the bone and paying off high-interest-rate store and credit card balances, vehicle loans and, above all, any personal loans, as soon as possible.

"Once this is done, any spare income should really be diverted to saving hard for deposits. Only 21 percent of the home loans now being granted are for 100 percent of the purchase price, and those who get them usually have to agree to pay a premium interest rate as high as three or 4 percent above prime, which once again makes homes less affordable and can add substantially to the ultimate cost of a home."

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 18 Jun 2018
      Many home sellers are motivated to appoint estate agents because they know that the agency will carry the costs of advertising and marketing their property.
    • 18 Jun 2018
      When a property is sold when it has a tenant in occupation, the questions often raised are: “What happens to the tenant if the landlord sells the property?”, and what rights the tenant will have with regards to cancelling the lease or enforcing it, says Sunell Afrika, rentals manager for
    • 18 Jun 2018
      Sellers are often caught off-guard by the expenses incurred in the selling of a property. Just like there is no such thing as a free lunch, there is also no such thing as selling your property without incurring at least some costs.
    • 15 Jun 2018
      The second quarter of 2018 has proven to be the turning point for Midrand’s real estate market, especially the upper end which started to waver towards the end of a tumultuous 2017 with a notable drop in both sales and average selling prices.
    • 15 Jun 2018
      According to data recently released by FNB, the average age of a South African home buyer has increased from 38 to 44 this year. In an attempt to help first-time buyers enter the market sooner, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, walks us through the steps of saving for your first home.
    • 15 Jun 2018
      Putting your house on the market can be a stressful process. There are so many decisions to make that will impact how quickly your house is sold and for how much you can sell it for. It’s a serious money game where you can’t afford to make the wrong decision.
    • 14 Jun 2018
      The word tourist describes someone who is visiting South Africa for a limited time and is probably not going to buy a property here – so why is the tourism industry so important to the real estate sector?
    • 14 Jun 2018
      Serengeti Estates has entrenched its status as one of Johannesburg’s most desirable addresses for a spectrum of homeowners with its launch of The Signature Residences, a new cluster village.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us