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Gauteng’s first time buyer affordability is set to boost the local market in 2018

property affordability

According to the FNB Estate Agent Surveys through 2017, the estimated average first time home buyer level was 20.27% of total home buying for the year. This is at almost the same level as the 20% average for 2016, a more-or-less sideways move last year, after noticeable declines in the prior 2 years.

In the latest FNB Property Barometer John Loos, household and property sector strategist, attributes this stabilisation to a gradual turn in the interest rate cycle after prior hiking from early-2014 to early-2016.

Gauteng is the driver of the increase in 2017: Greater Johannesburg saw an increased average first time buyer percentage, from 21.6% in 2016 to 25.9% in 2017, while Tshwane region went from 23.75% to 26.7%.

These percentages, both strong and above the national average estimate, we believe are due to Gauteng being the most affordable major residential region, when affordability is considered as average house price relative to average household income.

In the coastal metros, the first time buyer picture appeared less positive in 2017: Ethekwini and Nelson Mandela Bay saw declines in their average estimated first time buyer percentages, Mandela Bay from 19.6% in 2016 to 17% in 2017, and Ethekwini from 20.5% to 14.7%, both thus undershooting the national average.

However, the most severe decline in estimated first time buying levels took place in the City of Cape Town. That region’s strong house price growth in recent years has been well-documented, and with such superior house price growth has come significant home affordability deterioration.

The region’s annual first time buying percentage fell sharply from 18.39% in 2015 to 12.8% in 2016, and then further to 7.5% in 2017.

Based on deeds office registration date the average age of bonded buyers also reflect a more affordable Gauteng, said Loos.

The estimated average age of a bonded home buyer was 36.95 years in Gauteng, the lowest average age of any of the nine provinces. The three major coastal provinces continued to show significantly higher average ages for bonded home buyers, 39.3 years in the case of the Eastern Cape, 39.1 years in the Western Cape, and 39 years in the case of KZN.

Loos concluded that strong first time buyer levels in Gauteng could be a contributing factor to that region’s residential market becoming the relative “outperformer” in 2018.

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