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First-timers: Buy while stocks last!

20 Oct 2011

Residential property prices declined by 2 percent in September but estate agents say this is a perfect chance for first-time buyers to buy property.

The ooba report revealed that the average approved bond size increased 6 percent y/y in September to R731 828 from R690 331 in 2010 as deposits as a percentage of purchase prices have reduced.

According to the September oobarometer house price index, the average house price decreased by 2 percent year-on-year (y/y) to R838 645 from R855 729 a year ago.

Positive growth of 1.1 percent was recorded on a month-on-month basis in September, says Saul Geffen chief executive officer of ooba.

“I expect the current trend of monthly nominal slight negative or slight positive growth swings to continue for the remainder of the year,” says Geffen.

This volatility is primarily due to the changing mix of buyer profiles and properties purchased relative to the base year in 2010, he says.

Geffen says the continued growth in the average purchase price among first-time buyers with y/y growth of 6 percent to R 619 920 in September 2011 from R 584 890 a year earlier, reflects a trend of increased activity for first-time buyers.

“The average first time buyer’s purchase price has seen consistent growth in the past quarter.”

He says this is a trend resulting from the shifting economic demographics in South Africa, largely influenced by the emerging black middle class, low interest rate environment and the ongoing easing in lending conditions, especially in regard to deposit requirements.

The bond originator’s statistics show that 52 percent of applications are from first-time buyers, and 45 percent of applications are from black buyers.

Geffen explains that the rising housing costs and increased municipal and utilities tariffs are causing many home owners to opt for smaller, more cost effective houses, which alters the mix of properties in the index.

As a result of this, he says there is more demand for properties at the lower to middle end of the housing market.

The report also revealed that the average approved bond size increased 6 percent y/y in September to R731 828 from R690 331 in 2010 as deposits as a percentage of purchase prices have reduced.

The average decline ratio during September decreased by 0.7 percent y/y from 46.6 percent in 2010 to 45.9 percent in 2011.

Located in Crawford, Athlone, this neat and spacious, three bedroom family home with entertainment area and swimming pool, plus a one bedroom, one bathroom granny flat, is marketed by Pam Golding Properties at R1.1 million.

He says the average deposit as a percentage of purchase prices also fell 34.2 percent y/y to R106 817 equivalent to an average deposit of 12.7 percent of the purchase price.

“This is a significant improvement from the levels seen in 2009 and opens up a considerably broader homebuyer base who can now afford the lower deposit requirements."

In September, the ratio of applications declined by one lender but granted by another was 22.5 percent.

Geffen says this ratio still highlights the importance of using a bond originator in the home loan application process.

A bond originator is able to submit the application to multiple lenders and homebuyers are therefore assured a higher probability of approval and on competitive terms.

First-time buyers are reportedly snapping up properties in the Cape Flats areas such as Mitchells Plain, Athlone and Elsies River in the Western Cape.

Pam Golding Properties (PGP) area principal Nazmie Anthony says there is a growing demand for homes among first-time buyers and buyers upgrading from small to larger homes.

Anthony says in Mitchells Plain, homes sell across a broad price range from affordable starter homes priced at R250 000 for a two bedroom home to R450 00 for three and four bedroom family homes.

 In the more established, elite area of Portlands, which attracts business people and professionals, three bedroom houses sell for between R400 000 to R450 000.

In Athlone, a culturally diverse area and one of the oldest suburbs on the Cape Flats, new small businesses are opening up therefore creating demand for homes as well.

He says Athlone has a well-developed shopping district along the Klipfontein Corridor – easily accessible from the N2 freeway and serving as a retail hub for most of the Cape Flats.

“This is an area where strong family ties are still encouraged and enjoyed, a factor which impacts positively on the sustained demand for homes.”

Buyers are said to be purchasing homes below R1.5 million and these include first-timers, those upgrading to big homes and buyers migrating into the area from Mitchells Plain.

PGP recently sold two plots in Hatton Estate, Rylands priced at R925 000 each.

He says this area centrally located and well sought-after after suburb, while neighbourhoods within Athlone such as Crawford, Penylyn Estate and Gatesville are in demand due to their close proximity to Gatesville Mosque.

Home buyers can find sound value for money in the price range from R1 million to R1.5 million in the upmarket Crawford and Penlyn Estate.

With an open plan layout this spacious, double-storey, six bedroom, three bathroom home in Crawford, Athlone, is ideal for a family and includes a swimming pool. Priced at R1.95 million through Pam Golding Properties, the property includes a borehole, intercom and security features.

Here, they can buy modern three or four bedroom, fully-fitted home with double garage and perhaps also a swimming pool, he says.

In Athlone and Belgravia three bedroom properties can be bought for below R900 000 and there are other affordable properties available in various other areas within Athlone.

Anthony says Athlone has quality five or six bedroom homes with good finishes, double garages and some with swimming pools at the higher end of the market priced from R1.5 million.

In Elsies River, two bedroom homes sell for R300 000 and three to four bedroom homes sell from R750 000.

The established suburb and more elite area of Old Belhar has the most demand in the price range of between R650 000 and R750 000. The average house prices in this area is between R300 000 to R550 000.

He adds that Belhar has broad appeal among home buyers due to its close proximity to schools, the University of the Western Cape and the Cape Peninsula University of Technology. – Denise Mhlanga

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About the Author
Denise Mhlanga

Denise Mhlanga

Property journalist at property24.com

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