The average purchase price paid by SA homebuyers has increased 8,6% over the past 12 months to reach R1,08m at the end of October 2016, according to the latest statistics released by BetterLife Home Loans, SA’s biggest mortgage originator*.
“These figures also show that the size of the average home loan approved increased 4,6% during this period to R842 000,” says CEO Shaun Rademeyer, “That means that the average deposit that homebuyers elected to pay also increased, to just under R240 000 or about 22% of the purchase price.”
“This is underlined by a substantial increase over the past 12 months in the percentage of bonds granted for 70% or less of the property value, with the balance of the purchase price being paid in cash.”
Boom in big home loan deposits
“Our statistics show that there has been a 6,7% increase during this period in the percentage of bonds going to buyers who have paid a deposit equal to 30 or 40% of the property’s value, and a 9,4% increase in the percentage of home loans being granted to those who have paid a deposit of more than 40%.”
Not surprisingly, he says, these changes correspond to large increases over the past 12 months in the percentage of bonds being granted in the higher purchase price categories. There has been a 7% increase, for example, in the R1m to R1,5m purchase price category, a 14% increase in the R1,5m to R2,5m category and a 19% increase in the over-R2,5m bracket.
“Generally, we observe that buyers in these price ranges are repeat buyers who are utilizing most of the equity they have built up in an existing home to assist them in the purchase of their next property. Their usual aim in putting down such sizeable deposits is to secure a favourable interest rate and keep their monthly home loan installments down, but we also regard it as a positive sign for the property market that they are prepared to commit large amounts of their own cash to long-term investments in South Africa.”
100% mortgage applicants turned away
Meanwhile, says Mr Rademeyer, there has been a significant 2,8% decline in the percentage of home loans granted for 100% of the home purchase price (usually available only to buyers in the affordable home category) and a 5% decline in the percentage of loans granted to those paying a deposit of 10% or less.
“These numbers correspond to a 3% decline in the percentage of bonds granted in the R500 000 to R1m purchase price category, a 9% decline in the R250 000 to R500 000 category and an 18% decline in the under-R250 000 category.”
Demand from first-time home buyers remains strong
These price ranges are those in which first-time buyers are most active, and reflect the increasing difficulty these buyers are now having in gaining access to the market, he says. “But, to be clear, there is no lack of demand from first-time buyers – in fact, the percentage of applications we receive from first-timers has been on a rising trend for the past year. The problem is that many of them have too much debt at the moment to enable them to save large deposits, and that means that they can’t bring their monthly bond installments within their affordability limits. Consequently, only 35% of all the home loans granted are currently going to first-time buyers.”
The BetterLife statistics show that the average purchase price paid by first-time buyers has risen 5% over the past 12 months to R740 000, while the size of the average home loan approved has increased by almost 4% to R650 000. The average deposit currently being paid in this sector is thus around R90 000, or 12% of the purchase price.
Mr Rademeyer adds that all buyers can improve their chance of being approved for a home loan by applying through a reputable mortgage originator such as BetterLife Home Loans. “Currently, those who apply on their own only have a 34% chance of success, while we are still able to secure approvals for 72% of all applications that we submit by preparing and motivating them correctly.”
*The BetterLife Home Loans statistics represent 25% of all residential mortgage bonds being registered in the Deeds Office.
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