New data shows an increase in the number of bonds being granted to first time home buyers in South Africa with a deposit of 10% or less.
Bond originator, BetterLife Home Loans, noted that the percentage of first-time buyers among home loan applicants rose to 47% in the 12 months to end-January – its highest level in two years.
“This indicates renewed confidence in property among younger buyers, especially, and is positive for the real estate market as a whole because it is these buyers who provide the stimulus for expansion and price growth in the future, as they move on to their second and third homes,” said CEO, Shaun Rademeyer.
“And more importantly, lenders seem to be matching their enthusiasm, with the percentage of bonds being granted to first-time buyers rising to 39% in the year to end-January, up from 38% in the previous 12 months.”
BetterLife Home Loans represents 25% of all residential bonds being registered in the Deeds Office.
At first glance, Rademeyer said, the rising demand among first-time buyers is somewhat surprising, given the tough consumer environment and high inflation rate over the past year, but it has been bolstered by the improving household debt to disposable income ratio.
“It has also helped that there have been no interest rate increases since last March. This has given many households time to genuinely improve their financial position by paying off existing debt and freeing up discretionary income, which then makes it easier to qualify for a bond.
“At the same time, price growth has been relatively slow, which has put a lid on the size of bonds required by prospective buyers. Our statistics show a 12-month increase of just 5.4% in the first-time buyers’ market, or less than the rate of inflation,” Rademeyer said.
A further positive for first-time buyers, according to Rademeyer, is that the lenders still require much smaller deposits in the lower home price categories than in the upper brackets.
“In fact, our statistics show that the average deposit being paid by first-time buyers now is just 12.2% of purchase price, compared to the overall market average of 22.5%.
“They also show that there has been a 4.4% increase in the past 12 months in the number of bonds being granted to buyers with a deposit of 10% or less,” the chief executive said.