First-time homebuyers in South Africa are feeling the pinch of high interest rates and a downbeat economy, opting to rather put their dreams of owning a home on hold than face the higher cost of entry into the market.<\/p>\n\n\n\n
This is according to the latest quarterly report from bond originator ooba, which noted a decline in the number of first-time buyers in the third quarter of the year.<\/p>\n\n\n\n
According to the group’s Q3 oobarometer, applications from the more interest-rate sensitive first-time homebuyer have reduced from 54% of total applications in Q3 2020 to only 48% of all applications processed by ooba during Q3 2023.<\/p>\n\n\n\n
“This indicates that, at present, first-time homebuyers in this market segment who are challenged with affordability constraints are placing their homebuying plans on hold,” the group said.<\/p>\n\n\n\n
While overall first-time buyer activity has slowed, the group noted that there are still pockets where this market segment comes out on top.<\/p>\n\n\n\n
\u201cFirst-time homebuyers do still make up over half of the applications received in the Free State, KwaZulu Natal, Mpumalanga and Gauteng South and East Rand – a clear sign that they\u2019re still keen to get a foot on the property ladder,\u201d it said.<\/p>\n\n\n\n
The first-time buyer market is also seeing an upward trend in spending – specifically, those first-time homebuyers who are buying are spending more. <\/p>\n\n\n\n
The average purchase price has increased year-on-year \u2013 up from R1,087,089 in Q3 2022 to R1,116,672 in Q3 2023.<\/p>\n\n\n\n
Ooba Home Loan\u2019s data also shows that first-time homebuyers are getting older \u2013 now at 36, up from 35 in Q3 2022. <\/p>\n\n\n\n
\u201cThis figure comes as no surprise. Homebuyers who continue to prioritise their financial wellbeing may take longer to enter the property market as they continue saving to build up a healthy deposit,” the group said.<\/p>\n\n\n\n
The first-time homebuyer market is also reflective of trends in the wider property market.<\/p>\n\n\n\n
The same high-interest-rate environment that is keeping first-time buyers on hold is also pushing other buyers to pay bigger deposits in a bid to take the edge off higher bond interest costs.<\/p>\n\n\n\n
The average deposit for Q3 2023 was recorded at 9.7% of the purchase price (R137,891) – up by 6.6% year-on-year from Q3 2022 to Q3 2023. <\/p>\n\n\n\n
The first-time homebuyers\u2019 segment also recorded a major increase in deposits – up a staggering 25.9% year-on-year from Q3 2022 to Q3 2023, now at R114,323 – 10.2% of the average purchase price.<\/p>\n\n\n\n
The good news for buyers is that the big banks are still lending competitively, ooba said.<\/p>\n\n\n\n
‘With an average rate below prime, (this) paints a positive outlook for the property sector at the peak of the interest rate cycle,\u201d the group said.<\/p>\n\n\n\n
The average interest rate awarded to ooba customers in Q3 2023 was recorded at 14 basis points cheaper than Q3 2022 \u2013 now at -0.44% below prime. <\/p>\n\n\n\n
In addition, the average bank approval rate for ooba Home Loan applicants continues to hold steady at 82.9% for Q3 2023 \u2013 marginally lower than the 83.6% recorded in Q3 2022.<\/p>\n\n\n\n
\u201cThis should assist buying activity in the market – particularly among homebuyers with a good credit score and a deposit-backed application,\u201d it said.<\/p>\n\n\n\n