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Why first-time buyers should leap onto the property ladder in 2017

Why first-time buyers should leap onto the property ladder in 2017

The average home price paid by first-time buyers has risen by a modest R37,000 in the past 12 months, but the average home loan installment has increased by almost R700 a month.

This is despite the fact that buyers are paying much bigger deposits than they did a year ago according to mortgage originator, BetterLife Home Loans.

“This represents a clear decline in affordability for first-time buyers. We believe potential first-time buyers should make a decision about buying property as soon as possible, because it is going to become increasingly difficult for them to become homeowners in the next 12 to 18 months, even if there are no further interest rate increases,” said Shaun Rademeyer, CEO of BetterLife Home Loans.

“Our latest statistics show that while the average first-time buyer home price has risen by 5.7% in the past 12 months, the average deposits paid by such buyers – as a percentage of purchase price – has risen from 11.1% to 12.3%, taking the actual rand amount of the average deposit in this sector from R79,000 to R92,000.”

Intuitively, Rademeyer noted, one would expect this to have lowered the average monthly bond repayment for first-time buyers, “but unfortunately, there were also three interest rate increases in the past 12 months which caused the variable home loan rate to move from 9.5% to 10.5%, and the result has been an increase of almost R700 in the average instalment”.

Larger household incomes needed to secure home loans

“At the same time home prices have continued to rise, albeit slowly, and at this stage are set to keep rising, especially now that South Africa has escaped a rating downgrade, and consumer and business confidence is starting to rise again,” the property expert said.

“This means that prospective buyers are going to need bigger household incomes to qualify for home loans in the coming months. As it is now, the average first-time buyer who pays a deposit requires a household after-tax income of at least R22,000 a month to qualify. This is almost 13% more than was needed a year ago, and most people are not getting salary increases of this magnitude in the current economic climate.”

Rademeyer pointed out that SA consumers have been warned that they will be paying more tax in 2017, while banks are likely to apply even stricter credit granting criteria in the light of the rising unemployment numbers and the increased risk of default.

Potential home buyers should not wait to buy

The clear message, he said, is that first-time buyers should not wait any longer to make the leap into home ownership, even if they have to downscale their aspirations and buy a smaller, less expensive home to start with. “And by the looks of things, many people have got it, or are being prompted to consider it as rentals continue to rise across the board”.

“Our figures show that while repeat buyers are still in the majority, the percentage of home loan applications submitted by first-time buyers has risen slightly in the past 12 months, although due to the decline in affordability the percentage of home loans granted to such buyers has remained constant at around 35% of the total,” Rademeyer said.

The BetterLife Home Loans statistics represent 25% of all residential mortgage bonds being registered in the Deeds Office.

Read: Crucial court ruling gives SA banks greater freedom on home loans

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  • Daniel xRapscallion

    Yeah, please buy a home we needmtje business and here is some out of context stats to back up oir marketing stunt.

    If a lot of people followed this advice then home prices will go higher…. self-fulfilling prophecy.

    Or everyone can hang back on buying a house and wait for the weaker holders to start lowering their prices and then swoop in. Patience pays.

    • In most areas the home prices are increasing less than official inflation- and certainly less than our current REAL inflation! However building costs have not followed suit and the gap between existing or older homes and their replacement cost has widened further!
      I don’t have any statistics but my experience and thus educated guess is the difference is now over 30% and this may well be the widest this convergence has been in the last 40 years!
      Depending on ones view of the future of the property industry, this presents the best buying opportunity I’ve seen in that time.(Building costs wont come down!)
      What the Industry big guys should be doing is beating Govt over the head to reduce it’s ridiculously high costs of transfer or extend relief of this to a much higher purchase price.
      Further cost savings could be made across the industry by converting our time-path and-labour ‘expensive’ system of record & transfer to and at Deeds offices by employing a model based on Blockchain technology. It’s better as its faster, cheaper, safer, simpler and it really is ‘immutable’- can’t be interfered with!

  • Freddie Jones

    Buying property in SA is a BAD investment.

    If you have cash to spare, buy US $.

    Every SA resident is allowed to invest up to R4MILLION a year out of SA.

    Just compare the exchange rates.

    On the 1st Jan 2007 R10 000 bought you US$ 1 423

    Today the 1st Jan 2017 that US$ 1 423 is worth R19 544

    Where in SA have house prices given that sort of return? Even before feeding Bond Interest rates into the equation.

    • Jacobus Pienaars

      And here is the reason NOT to buy property in the US this year: Trump. The backlash (internally) will come. Also, he will restart the very same sort of Wall Street that gave us 2008.

    • Frank McDuff

      I partially agree with you here but there is a huge difference between investing and speculating.
      The first time homeowner generally battles just raising the deposit. For Joe average a house is a very safe “investment”, which time has proved over and over again.
      The FX market (speculating) on the other hand is littered with corpses. It is a highly complicated affair, fortunes are made AND lost in milliseconds because of unknown future events. Not recommended unless one has a spare million or two.
      For the average Joe it’s better to stick with owning a house ((plus)) you don’t have to put up with idiot landlords who’s bond you’re paying anyway.

    • Blapartheid Zulu

      R4 million a year to invest out of SA? On properties or? How?

    • bengine

      Your hindsight has served you well but do not give in to the dark side.

      With that kind of thinking there is no such thing as risk investment – just go to the future look back and make the right call.

      Property purchased in 2006 has more than doubled in value (in some areas). Yes there is rates and interest but that is offset against rental you would have had to pay anyway.

      Any good investor spreads the risk – FX speculation is much higher risk than property and certain areas in SA are prime locations.

      With the uncertainty in the markets at present – don’t see property as being a bad call right now – at least not in CT.

      • YouDontEvenKnowMe

        No man,I bought a house in a nice cape town suburb 7 years ago. Today I’m selling it for more than 20k usd less. Investing in S.A. is the worst decision ever

    • 0xbeef

      yes, you tell them… Rather buy a broom cupboard in London and enjoy that great investment while looking at the grey sky.

    • In themselves, USDollars have not much upward growth and any will be short-lived – a year or so. The Rand will continue to shrink and is seriously sick from years of decline and negative/nil Govt remedial action- and other ‘known’ factors!
      If you’d bought Bitcoin at the beginning of January ’16 you would have seen a growth from US$434 to $1011 this am! The Market cap of crypto currencies quoted on Public Exchanges is over 17.5 Billion dollars – and this industry is just starting to grow. Good digital currencies using Version 2.0 and 2.1 technology offer much more upside.
      Property has always been a good long term investment- but be sufficiently diversified though, to weather any Zimbabwe type scenario for a good many years!?
      Good disruptiveTechnology and their marriage with others is where there are always opportunities to get into some alternatives! Blockchain technology thats revolutionising money and many asset based sectors offers some exciting opportunities. Seek and ye shall find!

  • Runnin Bare

    All very well to talk numbers to try to BS the public for the benefit of the property business. There are far better investments than property. Besides, property is unaffordable to Mr average wage and salary earner in SA.
    The looming political land situation and uncertainty makes investing in property a high Risk in the longer term.

    • Jacobus Pienaars

      I am afraid you are probably right. Houses are VERY expensive (in relation to earnings), keeping a job or finding another one is a very insecure thing, suburbs can change quickly given the incompetent local administrations and hilarious planning (drive down Commissioner street in Jhb city center to see what a city council did in the illusion they are planning urban transport) and the police, well they mainly cruise around in old bakkies and the advocates cream it just by defending govt officials and politicians in pretty easy sort of cases, made easier by politicians who demand to go to court cause they believe they are above sheet like this. Which means if you buy a house and when you want to move in you find 20 people squatting in it, you are skrewed. Unless you have about R50 000 extra for legal stuff (and the time). In which case you probably would not have bought the house.
      Or you move in OK and next month the twart next door sells to a Nigerian “investor”. Then you REALLY are skrewed…
      SA can be a great place to buy a house and live a good and very interesting life in. But right now it is not. At least not in Gauteng. And it will be some time still before it will be.
      If Zupta goes AND he is replaced by a better dude AND that dude makes good appointments AND they all actually start governing with some sense. Then one can start thinking about buying a slightly down house and expect it to increase in value both in terms of money and a place to live in.

      • Runnin Bare

        I have been in contact with many foreign investors and fixed investment is diminishing fast in SA. Biggest reasons;
        Unstable Zupta politics especially the communist noise by EFF. Not even any confidence in Cyril Ramaphosa or Dlamini Zuma as a credible future leader.
        Labour laws are another big one. Who in their right minds wants to invest big bucks and put up with this nonsense.
        Violent protests are on the list.
        There are far better places to invest in than SA under Zupta and the possible future.

  • Jacobus Pienaars

    And here is the reason NOT to jump in: A dude who makes money of people buying houses, just said it was a GOOD idea to buy houses quickly now.

  • Brian

    I am just going to wait for Juliarse to nationalize all land and housing and hope he gives me one when he dishes them out to those he deems deserving. Why buy when you might get one free?

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