Statistics indicate that homebuyers across the board are now required to pay higher deposits than before and those who are considering purchasing property should think about doing so before the percentage required rises even further.
In a recent report released by BetterBond, it was revealed that homebuyers are once again required to pay one fifth of the purchase price in cash before applying for a home loan. It's pretty heavy going considering that in addition to forking out a large sum of money to secure the bond, buyers are also responsible for transfer duty, bond registration and legal costs.
Rudi Botha, CEO of BetterBond says that the situation as it stands is very similar to that which buyers faced during the recession of 2008/9. "And, given the mounting pressures on the lending institutions to lower their risk, we do not anticipate that this trend of increasing deposit requirements will change for some time, meaning that those who are currently on the fence about buying property should do so without further delay."
It stands to reason that the news is not as devastating to those who currently own property and who are looking to invest in a new home as the proceeds from the sale of the existing property will help fund the next purchase. There is a glimmer of hope on the horizon for first time buyers, given that the average price of a first home now stands at R648 000 and the average deposit required is currently 12 percent. Although much lower than more expensive properties, it appears that the amount of deposit required is rising and Botha confirms this by noting that the percentage required for a deposit has increased from 11.6 percent in August and 9 percent in July.
However, the BetterBond statistics also reveal a sharp drop in the percentage of loans being granted for 100 percent of the purchase price. This dropped to 29 percent in September (from 35 percent in August, 39 percent in July and 41 percent in June) and could signal a slowdown in first-time buying over the next few months.
Indeed, the percentage of bonds granted in the R500 000 to R1-m bracket traditionally the preserve of first-time buyers, has already dropped to 35 percent from the 38 percent recorded a year ago.
For now though, says Botha, housing demand continues to rise - "perhaps because more consumers in the upper price brackets are realising that if they don't buy soon, while prices are still at relatively low levels, the increasing deposit requirements and other costs of home acquisition could drive them out of the market".
The statistics show an increase of 11 percent month-on-month in the total number of home loan applications made during September - with a surge in demand for bonds of more than R1,5-million, even though the average deposit required in such cases is well above 20 percent.
"Some 29 percent of the bonds granted in September were for homes priced at more than R1,5-m, compared to 25 percent a year ago, which resonates with a number of reports recently about an increase in sales activity at the upper end of the market."
South Africans have never been regarded as a nation of savers. However, given the current state of affairs it is becoming increasingly clear that those who are serious about buying property are going to have to become far more serious about saving. They are going to have to take an objective long term view, budget according and show the banks how much they really want that dream home.