Number of first time buyers declining

Private Property South Africa
Tahir Desai

Estate Agents surveyed by FNB indicated that while the level of first time buyers expressed as a percentage of total home buying remained high, it was starting to decline.

“We believe that the mild decline may just point to rising challenges regarding home affordability off late,” said John Loos, FNB’s chief household and property sector strategist.

According to the sample of agents surveyed, 1st time buyers were estimated to be 25% of total home buyers. This is lower than the 28% high of the 2nd quarter of 2014, and the percentage has now been lower than last year’s high point for 3 consecutive quarters, indicating a downward trend.

Buyer Panic

It would appear that an increasing proportion of first time buyers are concerned about house price increases and affordability challenges, as indicated by the “Buyer Panic” related survey questions.

Buyer Panic refers to the state of mind where first time buyers begin to fear that if they don’t buy a home quickly, the price levels will rise to levels where the property becomes unaffordable for them.

In the past 6 surveys, agents have consistently perceived that a high number of first time buyers are driven by panic buying.

The most recent survey estimate stood at 38%, which was an increase from the previous quarter and up from 30% a year ago.

Affordability Issues

Economic conditions are gradually turning against residential property, after 3 years of economic growth decline, a bad start to 2015 and the likelihood that interest rates will rise.

Last year, FNB Affordability Indices began to point at residential affordability deterioration.

While first time buyer percentage remains high, it is starting to decline which may indicate mounting affordability issues.

In addition, higher levels of buyer panic would also suggest increasing house price inflation.

Provided “buyer panic” does not become too extreme, and given the likelihood of ongoing domestic

economic growth weakness, growth in 1st time buyer numbers looks set to be muted from here onward, which suggests that one potentially important driver of residential demand and thus house price growth may decline in significance in the near term.


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