Some 78% of residential bonds granted in the past 12 months have been for less than R1,5m; and 60% for less than R1m. This is according to statistics by mortgage originator, BetterBond, which noted that “while the banks are keen to lend to home buyers and our [BetterBond’s] bond approval rate is at 80%, the highest level since the 2008/09 financial crash, the latest statistics from Absa show that the total of outstanding household mortgage balances is currently growing more slowly than it did last year. The year-on-year growth rate is down from 3.6% in November 2017 to 3.1% currently”, said Rudi Botha, CEO of BetterBond, noting that this does not mean South Africans are buying fewer homes, only that they are buying less expensive homes.
“In general terms, these cheaper homes are also smaller, as indicated by recent FNB research showing that the average size of new homes being built in SA has shrunk from a peak of 203m² in 1974 to around 162m² now – and that accounts in large measure for the current slow growth in home prices (2.9% year-on-year) in spite of a drop in the prime interest rate and increased sales volumes.”
However, Botha says, affordability is not the only reason for the increased popularity of smaller, cheaper homes. “Changing lifestyles also play a big role. Household sizes are shrinking, for example, so buyers generally need fewer bedrooms. Many homeowners now are also short of time so don’t want a large garden or home to maintain. Traffic congestion is also driving a significant shift from the large homes of the suburbs to smaller homes in urban centres.
“In the SA context it must be said that smaller properties are usually also easier and less expensive to secure, and the effect of this concern can clearly be seen not only in the increasing number of estate developments, but also in the steady growth of Sectional Title in SA over the past 30 years. In the late 1980s, secure sectional title developments accounted for only 6% of new builds in the country, but today they account for 27% of all new homes.”