Steadfast buyers stick to property

Over the past 12 months, more than half of the applications for home loans (54%) have been made by repeat buyers and those buying second properties for investment or leisure, according to the latest statistics released by BetterLife Home Loans, SA’s biggest mortgage originator

“This indicates that there is still a very high level of confidence in the property market,” says CEO Shaun Rademeyer, “and this is underlined by continued growth in the purchase prices being paid by those in the upper-income groups.” (See table below)

“The trend is especially noticeable in the R35 000 to R40 000 a month earnings category, where our figures reveal a 29,5% year-on-year increase in the average purchase price paid during the 12 months to end-August.”

Younger buyers stimulating growth in property prices

Purchasers in this income group, he says, are generally people between the ages of 35 and 45 who are buying for the second or third time and making a big jump in home size to accommodate a growing family. They also often have considerable equity in their existing properties that they can use as deposits on their new homes.

“And this is clearly what they are doing, as the stats show that the average percentage of the purchase price paid as a deposit by this group of buyers has more than doubled over the past 12 months. This is another positive sign for the property, as they could quite easily have chosen to buy less expensive properties instead, or put down smaller deposits and diverted those funds into some other form of investment.”

Despite economic pressures, people are still confident about buying property

Buyers in the income groups above R40 000 a month tend to be older,” says Rademeyer, “and with downsizing/ downscaling having become a very strong trend among buyers in the over-50 age group, average house price increases at this level tend to be much more circumspect.”

“Nevertheless, it is extremely encouraging to note that most are not choosing to leave the market or give up on home ownership, especially when one considers that many such buyers fall into the ‘sandwich generation’ that has to provide financial support for their ageing parents as well as their children, and are thus under tremendous pressure to keep their own debts and living costs down.”

“Indeed, their response generally is just to move to homes that are less expensive to run and maintain, with the concomitant effect on price increases. Old Mutual’s latest saving monitor shows that some 23% of SA’s working metro population falls into this sandwich generation, so their actions are likely to have a significant influence in many economic sectors.”

Lower income house buyers turned away from the market

Meanwhile, in the lower income groups, he says, it is evident that most household budgets are being squeezed between high inflation and high debt levels, with low and even negative house price inflation having been the result over the past 12 months.

Household gross income pm Av p/price in 12 months to Aug 2015 Av p/price in 12 months to Aug 2016 Percentage increase year-on-year Av deposit percentage Aug 2015 Av deposit percentage Aug 2016
<R15 000 R369 000 R384 000 4,1 17,3 21,1
R15k-20k R479 000 R476 000 -0,6 13,8 14,1
R20k-25k R573 000 R587 000 2,4 15,4 17,2
R25k-30k R686 000 R683 000 -0,4 16 17,1
R30k-35k R773 000 R774 000 0,1 15,5 16,5
R35k-40k R859 000 R1,112m 29,5 16,1 34,6
R40k-45k R960 000 R965 000 0,5 16,8 17,6
R45k-50k R1,059m R1,082m 2,2 17 19,3
>R50 000 R1,550m R1,652m 6,6 19,5 22,3

Source: BetterLife Home Loans

“Most first-time buyers fall into these income groups, and with the demand from such buyers dropping, there has been relatively low house price appreciation – except in the under-R15 000 a month category, where the increasing availability of the State-backed FLISP subsidy as boosted the purchase of affordable homes.”

“However,” says Rademeyer, “it must be said that overall demand has held up well over the past 12 months, considering that consumers have had to contend with several interest rate increases and high food costs as well as the market uncertainties evident in the run-up to the recent municipal elections.”

Lenders remain confident about approving bonds

“At the same time, the lenders have also continued to demonstrate confidence in the market, with the average size of the bond being approved having shown a year-on-year increase of almost 6% in the 12 months to end-August. They are, though, applying very strict credit criteria, as reflected in the fact that buyers who do not work through an originator currently only have a 34% chance of their application being approved.”

“BetterLife Home Loans, on the other hand, is still able to secure approvals for 72% of all the applications we submit.”

*The BetterLife Home Loans statistics represent 25% of all residential mortgage bonds being registered in the Deeds Office.





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