Weekend Argus (Saturday Edition)
THE CLOUDS ARE CLEARING
Recent statistics from bond originator show that first-time buyer numbers are increasing in the Western Cape
FOR MOST of 2019 phrases like “it’s a buyer’s market”, “take the plunge”, and “now is a good time to buy” have been bandied by estate agents encouraging buyers to take advantage of falling house prices and stable repo rates.
But how positive is the environment for buyers? And how many firsttime buyers have actually “taken the plunge”?
Statistics from bond originator BetterBond, which accounts for 28% of all new mortgages registered in the Deeds Office, show that 52% of all home loan applications are received from first-time buyers.
This percentage has “been steady” for the past 12 months to the end of September 2019, says chief executive Carl Coetzee, even though the total number of applications in the period rose 7.73% compared to the previous 12 months.
“What this means in real numbers is that there are more first-time buyers in the market, but they make up the same percentage of the total number of buyers as they did a year ago.”
A total of 48.72% of home loan approvals went to first-time buyers compared to 42.54% in the previous 12 months.
“This shows that while the percentage of first-time buyers has not risen, the percentage of first-time buyers who are qualifying for home loans has risen substantially over the past year.”
BetterBond statistics indicate that the average home purchase price for first-time buyers is now R982 000, compared to R915 000 a year ago, an increase of 7.3%. By comparison, the
average purchase price among repeat buyers has risen only 2.2%.
The average deposit paid by first-timers was R133 000 compared to R113 000 the previous year. Coetzee says the average age of this group has also increased slightly from 35 to 36.
First-time buyer statistics from Lightstone show that the biggest proportion of first-time buyers has been
in the 31 to 35 age group for four out of the past five years. In 2015, most first-time buyers were aged 26 to 30. The 36 to 40 age bracket accounts for the second highest number of first time buyers. Most first-time buyers are millennials.
Other data from Lightstone shows that women first-time buyers continue to outnumber men.
Although low levels of house-price inflation is bad news for owners, it improves affordability for first-time buyers, especially in Cape Town, where spiralling price growth in previous years knocked them out of the market. In Q2 of 2019, house-price growth in Cape Town softened further to just 0.5% year-on-year, says FNB property economist Siphamandla Mkhwanazi. This is compared to already low growth of only 1.8% in the previous quarter. In real terms, taking into account inflation, average house prices have been declining “for a year now”.
“Overall, this marks the slowest growth rate since the end of 2009 and comes as no surprise, given the generally weak economic fundamentals and house prices that have for some time far outpaced income growth in the region and thereby eroded affordability.”
In addition, FNB Estate Agents Survey data shows that sellers are dropping their prices further, reaching reductions of 12% in Q2 2019. Favourable pricing appears to have spiked demand from first-time buyers.
“The agents’ estimate of first-time buyer transactions in Cape Town jumped to pre-boom norms, averaging 22% in the first six months of 2019. This suggests there were 3.3 times more first-time buyers in the Cape Town market in H1 2019 than there were two years ago,” Mkhwanazi says. “While this may be a transitory spike, following about two years of price-induced exile, it brings the first-time buyer participation more in line with the country average.”
He says the FNB Consumer Confidence Index (CCI) shows sentiment in the Western Cape to be “relatively more optimistic” compared to the country average.
“The CCI survey results for Q2 2019 showed consumers in the province as more upbeat about economic outcomes and their finances, as well as their rating now as appropriate to purchase big ticket items.”