What first-time buyers need to know about the property market right now
While the average home price being paid by first-time buyers has risen by a very modest R37,000 in the past 12 months, the average home loan instalment has risen by almost R700 a month.
This is despite the fact that buyers are currently also paying much bigger deposits than they did a year ago, noted mortgage originator, BetterLife Home Loans.
“This represents a clear decline in affordability for first-time buyers, who we believe should make a decision as soon as possible because it is only 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 BetterLife Home Loans CEO, Shaun Rademeyer.
“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 percentage of purchase price being paid as a deposit by such buyers 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.”
One would expect this to have lowered the average monthly bond repayment for first-time buyers, however there were also three interest rate increases over 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, Rademeyer said.
He pointed out that at the same time home prices have continued to rise, albeit slowly, and at this stage are set to keep rising, especially now that SA has escaped a ratings downgrade and consumer and business confidence is staring to rise again.
“And what this means, plainly speaking, is 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 – or almost 13% more than was needed a year ago, and obviously most people are not getting salary increases of this magnitude in the current economic climate,” Rademeyer said.
SA consumers have also 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, the property financing expert said.
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