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Here’s how the housing market is outpacing first-time buyers

Ask yourself if you're credit worthy before house hunting.

Some 47% of home loans granted in the year to end-February were for houses priced above R900,000 – up from 43.5% in the previous 12 months.

This is according to BetterLife Home Loans, whose statistics cover 25% of the market, and peg the average purchase price nationally at R1,1m – up 9% year-on-year.

“Of the loans granted in the price brackets above R900,000, the biggest share (26%) went to home buyers who were purchasing for between R900,000 and R1,5m, 15% to buyers in the R1,5m to R2,5m category, and 6% to those purchasing for more than R2,5m,” says BetterLife CEO, Shaun Rademeyer, who adds that this is a strong indicator of the increasing confidence that buyers in the higher price ranges have in the property market. “Especially if one considers that they are generally repeat buyers who are committing large amounts of their own money to these transactions.”

Buyers’ market, but only for those with large depositsbag-of-money-resize

While declining national house price growth is creating a perfect recipe for a buyers’ market, home loan applicants are having to put down bigger deposits to enhance their chances of receiving bank finance.

BetterLife statistics reveal that during the 12 months to end-February there was an across-the-board increase in the percentage of buyers choosing to pay deposits equal to 30% or more of the purchase price.

“Indeed, the percentage of loans granted to buyers with deposits of 40% or more has risen over the past two years, from 11.5% to 13.2% – while the percentage of loans going to buyers paying deposits of 10% to 20% of the purchase price has declined, from 24,3% to 22,5%,” said Rademeyer, noting that a year-on-year decline in the percentage of loans being granted for homes costing less than R900,000 was also observed, indicating a decline in affordability among buyers in this category.

Transfer fee relief may not cut itHanding over the house.resize

The below-R900,000 price band received a slight reprieve at the end of February when Finance Minister Pravin Gordhan announced that the government-levied transfer fee would be scrapped for homes priced at R900,000 and below.

Transfer fee exemption raised to R900,000

Despite this, first-time buyers in their 20s and mid-30s, and who have a monthly household income of between R15,000 and R40,000, may end up struggling to afford their first home. With economic growth predicted at between 0.6% and 1.2% for 2017, and consumer price inflation settling at 5.5%, salaried individuals are not expected to receive wage increases of more than 1.5% (adjusted for inflation), according to ECA International’s annual Salary Trends Survey.

The R1m and below housing market is, however, on an upward trajectory, currently inflating at between 5.5% and 6%. This is according to residential market analytics company, Lightstone Property, which anticipates national real house price growth to end the year at 1.3%. Despite this, the so-called affordable market of R1m and below looks like it will continue to grow, outpacing salary increases.

Source: Lightstone

Source: Lightstone

“[First-time buyers] have come under severe financial pressure during the past 12 months, which has made it difficult for them to qualify for home loans”, said Rademeyer. “However, it is important to note that this has not dampened their enthusiasm for homeownership, as reflected in the fact that the percentage of home loan applications received from first-time buyers has actually increased during this period, from 46% to 47% of the total.”

On the flip side, 61% of first-time applicants have been declined bond finance. So while slow house price growth nationally, as well as in the mid- and luxury-value price bands, makes buying an easier proposition, will the market below the new transfer fee exemption even be able to enjoy this small tax relief? All current indications scream an emphatic no!


David A Steynberg, managing editor and director of HomeTimes, has more than 10 years of experience as both a journalist and editor, having headed up Business Day’s HomeFront supplement, SAPOA’s range of four printed titles, digimags Asset in Africa and the South African Planning Institute’s official title, Planning Africa, as well as B2B titles, Building Africa and Water, Sewage & Effluent magazines. He began his career at Farmer’s Weekly magazine before moving on to People Magazine where he was awarded two Excellence Awards for Best Real Life feature as well as Writer of the Year runner-up. He is also a past fellow of the International Women’s Media Foundation.

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