South African homebuyers, it seems, have heeded the warnings from financial institutions and home loan experts since 2016, and have managed to reduce their short term debt before applying for bond finance.
According to Trading Economics April 2018 data, the average South African (not just those in the position to buy a home) did see an improvement in debt to household income; from 74.4% in 2016 to 71.9% in 2017.
Rudi Botha, BetterBond CEO, said that the 4% increase in number of home loans granted over the past 12 months, even though the number of home loan applications has fallen off by a similar percentage, is due to the fact that home buyers are now generally better prepared than they were a year ago.
“This increase in home loans being granted is also as a result of the increasing competition among lenders for new home loan business,” explained Botha. “More home loan applications are now being approved by the first bank to which they are submitted.”
The BetterBond statistics (25% of all residential bonds being registered in the Deeds Office) shows that over the past 12 months the percentage of first-bank approvals rose from 46% to 50%. At the same time the majority (55%) of the market is currently made up of repeat buyers.
While repeat buyers are generally financially better prepared to raise money for a deposit than first time buyers, the statistics suggest that buyers across the board are now able to afford a higher monthly bond repayment too.
“The decline in the percentage of purchase price being paid as a deposit is most noticeable at the top end of the market (homes priced at more than R2,5m) and the R500,000 to R1m mostly first time buyer market,” noted Botha. In these markets the decline in deposit being paid was 31% and more than 16% respectively.
Despite this decrease, however, the average approved bond size rose by 6.5% over the same period. This is a strong indication of the general financial health of the South African home buyer and their ability to afford larger monthly instalments since other debts have been reduced said Botha.