Homebuyers in their 20s fork out R90k for a deposit

2017-07-11 05:00
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Cape Town - It takes at least two years of diligent saving for homebuyers in their 20s to cough up an average deposit of R92 000, according to statistics from BetterBond.

The bond originator's data represents 25% of all residential bonds registered in the Deeds Office.

“Our figures show that the average first-time buyer earns around R37 000 a month, and assuming that they are able to save 10% of that, a R92 000 deposit would take 25 months to accumulate," said CEO Shaun Rademeyer.

However, he added that it is also likely that many of the young buyers entering the market have been planning and saving for home ownership for several years, since not everyone can or will manage to set aside 10% every month.

"This type of commitment is very encouraging and it accounts, we believe, for the fact that the percentage of home loan applications being made by first-time buyers continues to increase at this time, contrary to what might usually be expected in a tough economy.”

Statistics from BetterBond, previously known as BetterLife Home Loans, show that first-time buyers accounted for 47.6% of home loan applications in the 12 months to end-June, compared to 46% in the previous 12 months.

However, they obtained only 29% of all home loan approvals. Rademeyer said this suggests that even large deposits are not sufficient to persuade banks to approve loan applications if the prospective borrower doesn’t have an impeccable credit record and sufficient disposable income.

Large deposits from repeat buyers

Repeat buyers are also putting down large deposits. Rademeyer said this is mostly derived from the equity built up in their current properties, as property values increased and the balances owing on their home loans decreased.
 
The bond originator's statistics show that the average home price in the year to end-June was R1.095m - 3.6% higher than in the previous 12 months. The average approved bond size in the year to end-June was R868 000, or 4.2% more than in the previous 12 months.
 
“This means that the average deposit paid was almost 21% of the purchase price or R227 000 – a sum that would take the average repeat buyer more than 41 months to save if they could put aside 10% of the average R55 000 gross salary in this category,” said Rademeyer.
 
He said most repeat buyers actually use the proceeds of their sale as a deposit and are thus able to avoid any delay in purchasing a new home. This is reflected in a significant increase in the percentage of loans being approved for more than R1.5m.
 
However, Rademeyer said this should not be interpreted to mean that it is easy for such buyers to get loans. He said they too are subject to the same caution as first-time buyers, and currently have a 35% chance of their application being approved.

Meanwhile, South Africans are turning to unsecured debt to service home loans, reported Fin24 previously. About 30% of homeowners are borrowing short-term unsecured debt to keep home loan payments up to date, DebtBusters CEO Ian Wason told Fin24.

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