select
|

‘Deposit drag’ keeps market on a choke-chain

Everyone in the property market knows that the current deposit requirements for home loan approval are among the biggest obstacles to increased home sales and faster property price growth.

But just what the extent of the deposit obstacles might be has not been quantified until now, with the release of new statistics by BetterBond, SA’s leading mortgage originator, which show how the home buying plans of many consumers are being delayed by many months due to rising deposit requirements.

The BetterBond figures, which represent a quarter of all residential mortgage bonds being registered in the Deeds Officeand include applications to, and bond grants from, all the major lending banks in SA, show that in the 12 months to end-February, homebuyers and owners in SA took up more than 80 000 new home loans, with more than 96% of those loans going towards the purchase of an existing home or the construction of a new one.

In addition, the average purchase price of the properties on which these bonds were granted rose 8,5% year-on-year to R867 000.

“But although these are healthy signs that the residential market is in recovery,” says BetterBond CEO Rudi Botha, “we believe it would be gaining momentum much faster if it were not for the fact that the size of the deposits that prospective homeowners are expected to pay is also increasing – and not in proportion to the rate of home price increases.”

For example, he says, the average value of the bonds granted in February, at some R745 000, was only 6,7% up on the average value in February 2012.“In other words, the bond value gain is not keeping up with the home price gain – and the discrepancy is explained by the increase in the average deposit required, which has gone from 16,1% of purchase price a year ago to 16,7%. This has boosted the actual cash requirement for the average deposit from about R129 000to around R145 000.”

Meanwhile, the average household income of bond applicants has actually remained static over the past year at around R46 000, so for those who do not have equity in an existing property and need to save a deposit, the time that would be needed to do so has gone from 28 months to 32 months (assuming they are able to save 10% of their income per month).

And this four-month delay appears to be the minimum extent of the ‘drag’ that current deposit requirements are having on the market.BetterBond statistics show that the average purchase price for first-time buyers has risen more than 16% to R677 922 in the past year, while the average deposit requirement has gone from 8,6% of purchase price to 10,1%.

During the same period, the average income of first-time buyers applying for home loans has only risen about 5,5%, with the result that the estimated time it would take the average first-time buyer to save up a deposit, at the rate of 10% of earnings per month, has gone from about 17 months to 23 months.

“It will of course take much longer for those who cannot save as much, or those who plan to buy higher priced properties,” notes Botha. “Our stats show that those seeking to buying a first home priced at between R1m and R1,5m would now need 54 months to save a deposit - as opposed to 44 months a year ago – a very long wait during which they are very likely to lose out on the interest rate and home price advantages of the current market.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Nov 2017
      Property valued at approximately R1 billion is on High Street Auctions’ sales floor during the month of November, including the much-anticipated sale of the Tshwane Mayoral Residence and the land occupied by one of South Africa’s oldest operating gold mines.
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK