The majority of new bond applications in South Africa are made by repeat home buyers.
This is according to new data supplied by BetterBond which found that repeat buyers currently account for 55% of new bond applications and 66% of formally granted home loans.
“This is a positive indicator for the market,” says CEO Rudi Botha, “because it shows that despite the current political and economic uncertainties, most existing home owners are not selling up and extracting all their proceeds, but re-investing these into their next homes in SA.
“Indeed, even though consumers have been under tremendous financial pressure over the past 12 months, the average deposit paid by buyers in this sector has only declined from R223,000 to R220,000. And this has done much to sustain home price growth, which showed a year-on-year rate of 5,2% at end-August.”
He added that growth has also been facilitated by the willingness of banks to lend more – especially to buyers with substantial deposits – and this has caused the percentage of home loans being granted for amounts greater than R1m to rise to 41% in the past 12 months from 39% in the previous year and 38% two years ago.
“By contrast, though, there have been significant declines in the percentages wof bonds being granted for less than R250,000 and for between R250,000 and R500,000 – the home price categories which have traditionally been most favoured by lower-income first-time buyers with a housing grant or only a small deposit,” he said.
Botha noted that this was not a positive sign for the future of the market as it suggests that many entry-level buyers are being squeezed out of the market – perhaps permanently – because they simply cannot afford the monthly bond payment.
“Our stats show that the average home price in the first-time buyer sector has risen by almost 10% in the past 12 months to R842,000 and that there has simultaneously been good growth in the percentage of bonds granted in the R500,000 to R1 million category.
“But that suggests that the income required just to enter the market has shifted substantially higher than the majority of SA households earn, that the ‘nursery’ of the market is shrinking and that the total number of market participants available to become repeat buyers will accordingly be constrained for some years ahead.”