In the past year, home prices in the first-time buyer sector have grown only half as fast as they did in the previous 12 months, according to the latest statistics from BetterLife Home Loans, SA’s biggest mortgage originator.
And that, says CEO Shaun Rademeyer, is good news in the face of the recent interest rate increases, because it means that those who are currently thinking of buying for the first time won’t need to borrow much more now than they did at this time last year – and that their monthly bond repayments won’t be that much higher.
The BetterLife Home Loans statistics, which represent 25% of all residential mortgage bonds being registered in the Deeds Office, show that the average purchase price for first-time homebuyers increased by just 2,23% in the 12 months to end-January, compared to almost 5% in the previous 12 months.
In addition, notes Rademeyer, the average approved bond amount for first-time buyers has increased by 4% in the past year, while the average amount of cash required as a deposit has shrunk by almost 17%, which also makes it easier for new buyers to get into the market, as does the fact that there is no transfer duty payable on homes costing less than R750 000.
“In rand terms, the average first-time buyer home price currently stands at R665 000, the average approved bond in this sector at R619 000 and the average cash deposit required at R46 000. This means that on a new 20-year loan approved at the current prime rate of 10,25%, the average monthly bond repayment for first-time buyers is now R6089.”
The news is, unfortunately, not so good for those who were planning to upgrade to larger or more expensive homes this year, he says.
“Our statistics show that home prices in the wider market have grown by an average of 6,5% in the past year, or very nearly as much as in the previous year (6,6%) and that fact combined with higher interest rates will make it harder to upgrade going forward.
“In fact, we expect it to fuel the trend towards downscaling in the repeat-buyer category, especially since the average amount of cash required as a deposit is currently some 19% higher than it was a year ago. This means that home sellers need to use more of the proceeds they receive now as a deposit on their next home, and makes them inclined to opt for less expensive purchases.”
Nevertheless, Rademeyer says, repeat buyers are currently the mainstay of the market, accounting for 54% of all home loan applications and 60% of all home loan approvals.
“As for the overall state of the market, interest rate increases totalling 100 basis points over the past year have resulted in a decline of less than 1% in the number of home loan applications being submitted – which shows that housing demand is still very strong.
“What is more, our figures reveal that the number of applications that are being declined outright by the banks has dropped by more than 16% over the past year, and that we have secured more home loan approvals in the past 12 months than in either of the previous years.”
BetterLife Home Loans continues to achieve a home loan approval rate of more than 75%, he says, and in the past year has assisted clients with some R40bn worth of new home loan applications.