First-time buy­ers on the in­crease


FIRST-TIME home­buy­ers are still work­ing hard to get into the prop­erty mar­ket and as a re­sult they cur­rently ac­count for more than 40% of all home loan grants, ac­cord­ing to the latest sta­tis­tics from Bet­ter­Life Home Loans, which is SA’s big­gest mort­gage orig­i­na­tor.

“De­spite all the eco­nomic gloom, we have also seen the ac­tual num­ber of home loan ap­pli­ca­tions from first-time buy­ers start to pick up again in the past few months,” says Bet­ter­Life CEO Shaun Rade­meyer.

“This has per­haps been prompted by ris­ing prices and the prospect of higher in­ter­est rates in the near fu­ture that might pre­vent them from be­ing able to af­ford a home or from qual­i­fy­ing for a bond. How­ever, the in­crease in the trans­fer duty thresh­old has re­ally helped, as has a de­cline in the av­er­age de­posit size re­quired.”

The Bet­ter­Life sta­tis­tics, which rep­re­sent 25% of all residential mort­gage bonds be­ing reg­is­tered in the Deeds Of­fice, show that in the 12 months to end-May, the av­er­age per­cent­age of the home pur­chase price that first-time buy­ers were re­quired to pay as a de­posit was 7.64%, com­pared to 8.51% in the pre­vi­ous 12 months.

This meant, he says, that the ac­tual cash amount such buy­ers had to pay as a de­posit also de­clined dur­ing this pe­riod – even though the av­er­age home pur­chase price for first-time buy­ers in­creased. “What is more,a home at the cur­rent av­er­age first-time buyer pur­chase price of R648 000 has since March at­tracted no trans­fer duty, so the to­tal amount of cash that such buy­ers need to com­plete their trans­ac­tion is now con­sid­er­ably smaller than it was a year ago.”

Mean­while, says Rade­meyer, there has been a strong gain in the past 12 months in the per­cent­age of loans be­ing granted for more than R1-mil­lion– even though the over­all av­er­age home pur­chase price for this pe­riod is only R945 000. “Our sta­tis­tics show that the per­cent­age of loans granted for more than R1-mil­lion rose by more than 7% - with most of the cor­re­spond­ing de­cline oc­cur­ring in the un­der-R500 000 cat­e­gory.”

Most of this gain, he says, oc­curred due to re­peat buy­ers ex­press­ing their con­fi­dence in the mar­ket by “trad­ing up” - and in many cases us­ing the eq­uity they had built up in their ex­ist­ing homes to do so. As it is, re­peat buy­ers ac­count for some 53% of all home loan ap­pli­ca­tions at the mo­ment (com­pared with 46% two years ago) and of course for 60% of loan grants. The per- cen­t­age of home loan ap­pli­ca­tions that are be­ing de­clined out­right fell to 28% in the year to end-May from 32% a year ago and 37% in 2013, which he be­lieves is largely due to the fact that many prospec­tive bor­row­ers are in much bet­ter fi­nan­cial shape now than they were two years ago. “They have less debt, their salaries have risen and, as men­tioned, many now have more eq­uity in their ex­ist­ing homes that they can use to put down big­ger de­posits and lower their risk pro­files.”

It is still ad­van­ta­geous for home buy- ers to go through a rep­utable mort­gage orig­i­na­tor to make sure that their ap­pli­ca­tion is pre­pared and pre­sented prop­erly.

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