Cheaper to be a first-time buyer in Gauteng

GAUTENG remains the best province for first-time buyers to step on to the property ladder while, in stark contrast, aspirant young buyers in the Western Cape struggle to afford to buy.

In Cape Town, less than 10% of property purchases this year have been by first-time buyers, FNB’s Property Barometer found, based on its Estate Agent Survey.

“A stark contrast between Gauteng’s major metros and the Cape Town metro remains apparent. For 2017 to date, Cape Town’s first-time buyer percentage has averaged a lowly 8.02%,” says FNB’s John Loos.

“This is down on its 2016 average of 12.8%.”

By comparison, Joburg’s 28.62% and Tshwane’s 24.3% year- to- date average first-time buyer estimates for 2017 reflect a “relatively affordable and price-realistic” Gauteng residential market.

Loos is not surprised, though, given that the Western Cape has experienced 53.7% house price inflation over the past five years, whereas Gauteng has achieved only 24.7%.

“The two Gauteng metros have actually seen an improvement in their 2017 year-to-date first-time buyer averages, with Tshwane rising from an estimated 23.75% for 2016 to 24.3%, and Greater Joburg from 21.6% in 2016 to 26.62% in 2017.

“Ethekwini and Nelson Mandela Bay have had relatively low house price inflation rates, similar to Gauteng, in recent years.”

However, unlike Gauteng, eThekwini and Nelson Mandela Bay have, so far this year, weaker first-time buyer estimates below the national average, Loos says. eThekwini’s 2017 yearto-date average has declined quite sharply from 20.46% in 2016 to 13.38%, while Mandela Bay has declined from 19.64% in 2016 to 18.03%.

“It is possible that these two regions, with their heavy dependence on the beleaguered manufacturing sector, may be starting to see their first- time time buying estimates reflect economies that are more under pressure than is the case in Gauteng.”

Loos says first-time buyers are highly sensitive to economic and interest rate cycles, largely due to this younger group’s high dependence on credit to buy homes. The result is that they tend to be more cyclical than older repeat home buyers on average, remaining out of the market in larger numbers in tougher economic and interest rate times – and vice versa.

“Given South Africa’s severe weakness in consumer confidence in recent years, the result of near zero economic growth, prior interest rate hiking from 2014 to early-2016, and heightened future political uncertainty, it is thus to be expected that first- time home buying should be well off best levels of a few years ago.”

The survey showed the average age of individual buyers has risen to 44.16 years for the 12 months to August 2017, from 43.05 years in 2014. – Property Writer