Warning for young home-buyers in SA looking for a loan
Data from bond originator, BetterLife Home Loans, finds that buyers over-50 pay on average almost twice as much for their homes, than buyers aged under-30.
The BetterLife figures show that the average home purchase price paid by buyers aged between 20 and 30 over the past 12 months was R772,000, while that paid by buyers aged 50 to 60 was R1 337 000 – and that paid by buyers over-60 was R1 687 000.
According to FNB data, the average price of homes transacted in May was R1,112,466.
However, there is a much narrower gap when it comes to the home loans obtained by buyers in these different age groups, said BetterLife Home Loans CEO Shaun Rademeyer.
“Our statistics show that buyers aged 20 to 30 are currently paying an average deposit of around R90,000, which puts their average bond at R682,000 and their average monthly repayment at just over R6,800.
“Buyers aged 50 to 60, however, are paying an average of R388,000 as a deposit, which takes their average bond down to R949,000 and monthly repayment to R9,475, or possibly even less if they are able to negotiate a preferential interest rate.
“The average deposit size for over-60s currently is R674,000, which puts their average bond at just over R1 million and average monthly repayment at around R10,000.”
Read: What first-time buyers need to know about the property market right now
Rademeyer pointed out that most older buyers are likely to be repeat buyers, giving them greater buying power that results from building up equity in a property which can then be used as a deposit to acquire a more expensive property, without raising one’s monthly home loan repayment too much.
“What is also encouraging, given the current economic and political uncertainties in SA, is the increasing number of over-50 buyers who are prepared to use their equity in this way and commit it to another, more expensive property purchase, rather than ‘cash-out’ the proceeds of their home sales and withdraw from the market,” Rademeyer said.
Stats from the bond originator showed that in the 12 months to end-May, 38.7% of all homes loans granted were for more than R1 million, compared to 36.5% in the previous 12 months.
At the same time, Rademeyer said that younger buyers are beginning to struggle to get on to the first rung of the property ladder. BetterLife’s statistics showed that over the past 12 months, the percentage of home loans granted for between R500,000 and R1 million, which is the space mostly occupied by younger buyers, has fallen from 40.2% to 38.6%.
This, according to Rademeyer, is not due to a decline in demand, as the percentage of home loan applications being made by first-time buyers has actually increased over the past 12 months from 46.1% to 47.5%.
“But the banks are becoming increasingly cautious when it comes to approving new loans and are applying very strict credit qualification criteria,” the property expert said.
Data showed that the initial decline ratio for all banks is currently almost 66% of home loan applications submitted.
The BetterLife Home Loans statistics represent 25% of all residential bonds being registered in the Deeds Office.
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