A combination of factors, including low-interest rates and strong sale activity, means that the average age of a first-time homebuyer has dropped dramatically in South Africa, says Berry Everitt, chief executive of the Chas Everitt International property group.
Price growth has been outpaced by salary growth for the past few years, which has helped to make homeownership more affordable for many working South Africans, said Everitt.
“But it is the low rates that have really tipped the scale and are driving the very high number of first-time buyers at the moment – as well as much higher-than-expected levels of sales activity among repeat buyers.”
The average age of first-time buyers in South Africa has been dropping rapidly this year, from around 37 before lockdown in March to around 34 currently, he said.
“The sooner you start gaining equity in your property by paying off your home loan, the sooner you will gain an asset that you can sell, rent out or use as collateral to borrow money so that you can afford tertiary education for your children, for example, or invest in further rental properties that will boost your income in retirement.”
Alternatively, Everitt said that buying young could just mean that you are “bond free” by the time you get to your mid-40s, and have more financial leeway.
“What is more, putting any spare cash into your bond now will not only give you a much better return – tax-free – than you can currently achieve in just about any other investment that is not much more risky.
“This is a habit that can actually help anyone pay off their property much sooner than expected and save hundreds of thousands of rands worth of interest.
“If you have a bond of R1 million at an interest rate of 7%, for example, and pay in an extra R1,000 a month, you will reduce the bond repayment term by more than four years and save some R208,000 worth of interest.”
Change in dynamics
Everitt said that thanks to the growing remote-working trend, young buyers are not necessarily following the traditional route of first buying a small apartment close to work and then moving to a bigger home as their family grows.
“The rapid uptake this year of technology that makes it possible to work from anywhere that has good cell phone and internet connectivity, also means that the first home you buy could now also be your ‘forever’ home, perhaps in a coastal or country town that is (for now) still much more affordable than one of the big metros,” he said.
Everitt said that repeat buyers are finding especially good value in the R2.5 million to R5 million price bracket, where there is still an oversupply of stock and a careful upgrade is likely to represent a good investment.
“Despite the current downward pressure rentals, the prospects for buy-to-let purchases are also improving, with the demand for rental accommodation of all types set to grow over the next few years.
“Initially we expect this to happen due to the delayed effects of Covid-19 and the lockdown, but within a few months demand should also start to be driven by the large infrastructure projects being undertaken as part of the government’s economic recovery plan.
“This will underpin rentals and as things stand now, prices are extremely competitive so investors should not delay,” he said.