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Entering the property market is more affordable now

16 Oct 2015

The average home purchase price among first-time buyers has climbed steadily over the past two years from R612 000 to R652 000, and yet, it has become more affordable to enter the property market.

Rademeyer says for the moment the demand for residential property continues to grow across all sectors of the market, as reflected in 2.1% increase in the overall number of home loan applications in the 12 months to end-September.

This is according to Shaun Rademeyer, CEO of BetterLife Home Loans, who says for one, the average percentage of the purchase price required by the banks as a deposit on first-time purchases has shrunk from 8.4% to 6.8%. He says this translates to a cash saving of around R9 000.

“Secondly, the transfer duty threshold was raised earlier this year from R600 000 to R750 000, which translates into further savings for most first-time buyers of up to R4 500. And thirdly, wages have generally risen faster than house prices over the past two years, so monthly home loan instalments as a percentage of income have grown smaller.”

Rademeyer says taken together, these factors have strongly underpinned first-time buying despite the sluggish economy and the rising cost of living, to the point where such buyers still account for more than 46% of the home loan applications received by BetterLife Home Loans and 40% of all loans granted.

“This picture could, however, change quite rapidly if the Reserve Bank goes ahead with further interest rate increases this year. Having no existing property to sell in order to help raise a deposit, first-time buyers are much more credit-dependent than repeat buyers, and usually quick to opt out of the market when rates - and monthly mortgage repayments - start to rise,” he says.

“In addition, they will often find it more difficult to qualify for a loan in these circumstances, especially if they already have other debt repayments to make every month.”

Rademeyer says for the moment, though, the demand for residential property continues to grow across all sectors of the market, as reflected in 2.1% increase in the overall number of home loan applications in the 12 months to end-September. 

The BetterLife Home Loans statistics, which represent 25% of all residential mortgage bonds being registered in the Deeds Office, also show a year-on-year increase of 2% in the total number of home loan approvals, and a 15.7% drop in the number of applications that were declined outright.

“Nevertheless, the figures continue to make it clear that prospective buyers have a much better chance of their loan application being approved if they apply through a reputable mortgage originator,” he says.
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