Finally, some good news for home buyers in South Africa
New data from bond originator, BetterLife Home Loans, shows that more home loans are being granted in the higher price ranges, which should bring some confidence back into the South African property market.
The group pointed to a substantial increase over the past 12 months in the percentage of home loans being granted for more than R900,000, which is the new Transfer Duty threshold announced during the Budget Speech in February.
CEO Shaun Rademeyer said the figures showed that 47% of the loans granted in the year to end-February fell into this category – up from 43.5% in the previous 12 months – while the average purchase price nationally was R1.1 million, or 9% higher year-on-year.
This comes after StatsSA announced earlier this week that the local economy contracted by 0.3% in the fourth quarter of last year, while muted growth of around 1% is projected for 2017.
BetterLife said that of the loans granted in the price brackets above R900,000, the biggest share (26%) went to home buyers who were purchasing for between R900,000 and R1.5 million, 15% to buyers in the R1.5 million to R2.5 million category and 6% to those purchasing for more than R2.5 million, the chief executive said.
“This is a strong indicator of the increasing confidence that buyers in these higher price ranges have in the property market, especially if one considers that they are generally repeat buyers who are committing large amounts of their own money to these transactions,” Rademeyer said.
Read: More SA properties are being sold for less than their previous purchase price
BetterLife’s data also showed that during the 12 months to end-February there was an across the board increase in the percentage of buyers choosing to pay deposits equal to 30% or more of the purchase price.
“Indeed, the percentage of loans granted to buyers with deposits of 40% or more has risen over the past two years from 11.5% to 13.2% – while the percentage of loans going to buyers paying deposits of 10% to 20% of the purchase price has declined, from 24.3% to 22.5%,” Rademeyer said.
On the flip-side, he pointed out that there has been a year-on-year decline in the percentage of loans being granted for homes costing less than R900,000, indicating a decline in affordability among buyers in this category.
These are mostly first-time buyers in their 20s and early-30s who have a monthly household income of between R15,000 and R40,000 and have come under severe financial pressure during the past 12 months, which has made it difficult for them to qualify for home loans, Rademeyer said.
Read: Budget 2017 in a nutshell
“However, it is important to note that this has not dampened their enthusiasm for home ownership, as reflected in the fact that the percentage of home loan applications received from first-time buyers has actually increased during this period, from 46% to 47% of the total.”
“In addition, the average purchase price paid by first-time buyers has risen by almost 5% in the past 12 months, while the average percentage of purchase price paid as a deposit has increased from 11.5% to 12%.”
This trend has been bolstered in recent months, he said, by lower fuel and food prices thanks to a stronger rand and good rains that have broken the drought, “and now we expect it to be given further impetus by the new Transfer Duty exemption – provided that the Reserve Bank is able to keep interest rates at their current levels.
“Nevertheless, the banks remain extremely cautious about granting credit, so prospective buyers applying for home loans are well advised to do so through a reputable originator like BetterLife Home Loans. Our success rate remains above 72%, while less than 35% of applications in the open market are being approved.”
BetterLife Home Loans said its statistics represent 25% of all residential bonds being registered in the Deeds Office.
Read: Why first-time buyers should leap onto the property ladder in 2017
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