More first-time buyers as house price growth slows - BetterBond | Fin24
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More first-time buyers as house price growth slows - BetterBond

Aug 17 2017 06:03

Johannesburg - Things are looking up again for first-time homebuyers in the current market, according to Shaun Rademeyer, CEO of bond originator BetterBond.
“The slight decrease in interest rates in July means it is easier to qualify for home loans – and there may be further decreases later this year," said Rademeyer.

"At the same time, the rate of house price growth over the past 12 months has been considerably slower than the rate of salary growth, and now our statistics show there has been a significant increase in the number of 100% home loans, the majority of which always go to first-time buyers in the lower income brackets.”

BetterBond statistics show the average price in the first-time buyer sector of the market increased by just 4.3% in the 12 months to the end of July (compared to 5.6% in the previous 12 months), while the latest available Bankserv figures put the rate of salary growth over the 12 months to the end of June at 6.7%.

Meanwhile the percentage of home loans being granted for 100% of the purchase price has risen from 39% to 41% in the past 12 months, while the percentage of loans being granted to buyers with a deposit of 10% or less has risen from 8.5% of all loans to 9.5%.

More bonds for first-time buyers

“Contrary to our expectations for the current market phase, the percentage of home loan applications submitted by first-time buyers also showed a year-on-year increase in July to 47.7% (from 46.1%), and the percentage of approvals that went to first-time buyers also improved, from 38% to 39%," said Rademeyer.
“There is no denying, however, that the political and economic upheavals of the past few months have taken a toll on the real estate market as a whole, with the total number of home loan applications showing a year-on-year decline in July of 6.2% and the total number of approvals dropping by 5.5%.”
In his view, the good news is that current home loan applicants are generally in better financial shape, in the sense that many have spent time paying off other debts so that they have more discretionary income with which to pay home loan instalments. In addition, prices as a whole have increased by an average of just 2.5% over the past 12 months, compared to 9.1% in the previous 12 months.  
“As a result, the percentage of applications that are declined outright by the banks has fallen from 27% to 25% in the past 12 months, while the percentage of immediate approvals has risen from 33.7% to 36%. The percentage of applications that are initially declined but are then 'rescued' by us has remained the same at 40%," said Rademeyer.

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