How long it takes the average South African to save up for their first home
First-time buyers typically need to save for at least three years to afford the deposit on a home – and the VAT and fuel price increases announced in this year’s Budget are going to make it even more difficult for them to reach that goal.
This is according to Rudi Botha, CEO of BetterBond, who said that the young home-buyers are finding it increasingly difficult to save up for their first home.
“BetterBond’s statistics show that the average home price currently being paid by first-time buyers is R797,000, with the average deposit being R91,000 – or about 11.4% of the purchase price,” he said.
“In addition, the most recent BankservAfrica figures show that the average take-home pay in South Africa is now R14,000 a month, so even a couple who are able to save 10% of their total earnings every month (R2,800) will need almost three years (32.5 months) to save up the R91,000.”
Botha said that many of these buyers will actually take longer than three years as their rent increases, alongside the cost of food, transport, utilities and healthcare, and the possibility of emergencies.
However, he added that it was important not to give up on the idea of paying a sizeable deposit, as this will not only improve chances of being approved for a bond, but could also mean that they qualify for a lower interest rate which means means more affordable monthly repayments and savings on the total cost of a home over the lifetime of the bond.
“The real answer for those who are really keen to get into the property market is to reset their sights and buy a less expensive home as a starting point,” Botha said.
“By doing this they will lower the amount they need as a deposit and quickly be able to replace their monthly rent payment with a bond repayment on an asset that is increasing in value.
“They should then also be able to divert what they were saving for a deposit into their home loan account and build up extra equity in the property that can be used, in a just a few years’ time, to help them ‘trade-up’ to a bigger and better home without having to stress about raising a big enough deposit,” he said.
Read: How living in a gated community affects the value of your house
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