FNB has released its latest Property Barometer, showing a positive trend in the number of first time buyers across the country.
A key early indicator of a residential market strength can be an increase in first-time buyer demand. These types of buyers are highly sensitive to the economic and interest rate cycles – especially the latter, noted household and property sector strategist, John Loos.
“This is because of the high dependence of this younger group of aspirant buyers on credit to buy homes.”
“Recently, we have seen housing affordability beginning to improve on a national basis. Interest rates haven’t risen further for almost one year, while average house price inflation has slumped to a mere 0.8% year-on-year by February 2017, a growth rate far slower than both consumer price inflation as well as average household income growth, implying declining house prices in real terms,” Loos said.
“The net result, we believe, should be some increase in the rate of first time buying when expressed as a percentage of total home buying in recent times,” he said.
Where first-time buyers are choosing to settle
While it is well reported that the Western Cape, and especially the City of Cape Town Metro, has outpaced the rest of the country with far stronger house price growth in recent times – the area also shows a very low first-time buyer percentage.
Likewise, the slower markets of Joburg and Tshwane had estimated first time buyer percentages of 27% and 21% respectively for the 2016/17 summer quarters. Cape Town had a far lower 8% estimate for the same two quarters, noted Loos.
“This regional differential perhaps demonstrates just how sensitive the first-time buyer population group can be to affordability challenges, and for these younger buyers, Cape Town appears to be proving a home buying challenge.”
“This would suggest that the currently very low house price inflation (outside of the Western Cape) in much of the country could strengthen first-time buying, provided interest rates remain unchanged as is the FNB expectation through 2017,” the property analyst said.