Bond originator BetterBond says that even large deposits are not guaranteed to persuade increasingly cautious banks to approve home loan applications in South Africa.
The average deposit being paid by home buyers in their 20s is R92,000, according to the latest statistics from BetterBond – previously BetterLife Home Loans – and for those earning the average first-time buyer’s salary, that probably represents at least two years of diligent saving.
The BetterBond figures show that the average home purchase price paid by buyers aged between 20 and 30 over the past 12 months was R772,000, while that paid by buyers aged 50 to 60 was R1,337,000 – and that paid by buyers over 60 was R1,687,000.
“Our figures show that the average first-time buyer earns around R37,000 a month, and assuming that they are able to save 10% of that, a R92,000 deposit would take 25 months to accumulate,” said BetterBond CEO Shaun Rademeyer.
However, the percentage of home loan applications being made by first-time buyers continues to increase, contrary to what might usually be expected in a tough economy, Rademeyer said.
The BetterBond statistics show that first-time buyers accounted for 47.6% of home loan applications in the 12 months to end-June – compared to 46% in the previous 12 months.
“However, they only obtained 29% of all home loan approvals, suggesting that even large deposits are not sufficient to persuade the increasingly cautious banks to approve loan applications, if the prospective borrower doesn’t have an impeccable credit record and sufficient disposable income,” Rademeyer said.
Meanwhile, Rademeyer said that repeat buyers also continue to show their confidence in the market by putting down very large deposits, mostly derived from the equity built up in their current properties.
“The statistics show that the average home price in the year to end-June was R1.1 million, which is 3.6% higher than in the previous 12 months, and that the average approved bond size in the year to end-June was R868,000, or 4.2% more than in the previous 12 months.
“This means that the average deposit paid was almost 21% of the purchase price or R227,000 – a sum that would take the average repeat buyer more than 41 months to save if they could put aside 10% of the average R55,000 gross salary in this category.”
Rademeyer warned that repeat buyers are subject to the same caution as first-time buyers, and they currently also only have a 35% chance of their application being approved.
The BetterBond statistics represent 25% of all residential bonds being registered in the Deeds Office.