Youngsters eager to enter property marketComment on this story
Cape Town - First-time home buyers are as young as 20 today, according to local research, with youngsters realising the value of starting early, ensuring they stake their claim in the property market as soon as possible.
In 2009, first-time home buyers were, on average, aged from their late thirties to early forties, several real estate companies say. But now they are way younger, between 20 and their mid-thirties.
According to the FNB Western Cape Property Barometer, a home-buying estate agent survey, first-time buyers account for 17 percent of total sales in the province, many to younger people.
Nazmie Anthony, area principal for Pam Golding Properties in Mitchells Plain and the south-eastern suburbs, said demand from first-time buyers was high.
“We are experiencing a particularly high demand from first-timers wishing to establish a foothold in the property market. With regard to age, first-timers are younger, even from 22 years up to the late thirties, whereas about five years ago the age of first-time buyers would range from about the late thirties to early forties,” he said.
They were also noticing that these younger buyers appreciated the financial significance of owning their own homes.
Laurie Wener, Pam Golding Western Cape managing director, said confidence was steadily returning to the housing market after a serious decline in 2009.
“The market in 2009 was characterised by excess stock, anxious sellers and a shortage of buyers. Therefore, with supply exceeding demand, prices softened significantly and unit turnover dropped by over 40 percent. Development business died, as did investor and foreign investment.”
However, the market turned around in the past few years, a situation she attributed to a combination of factors, including the cyclical nature of the residential property market, reduced prices, wide selection, sustained low interest rates, and a favourable exchange rate for overseas buyers.
According to the Property Barometer, first-time buyers in this province account for about 17 percent of the market, compared to a national estimate of about 28 percent .
“First-time buyers are typically more flexible as a group, choosing to stay out of the market in greater numbers in tough times, and then coming in droves in what is perceived to be good times,” the barometer said.
The Western Cape percentage was significantly higher than in 2010, reflecting the relatively good economic climate and interest rates of recent years. But the fact that the percentage was lower than the national average, the barometer continued, may hint at a slightly less affordable market than is the case in Gauteng.
“However, it may also in part be a reflection of Gauteng’s greater ability to attract young skilled migrants, whereas the Western Cape fares better in attracting the older, more established repeat buyers from other regions.”
In terms of pricing, young professionals prefer trendy areas close to the city, while young families want to be near schools and community services.
Typical first-time property buys range from R450 000 to R900 000, depending on location.
Residential villages have also become particularly attractive to first-time buyers. At Vanguard Resident Estate, in Heideveld, 90 percent of Pam Golding’s clients are first-time buyers.
However, agents said first-time buyers continued to face a host of challenges as they tried to enter the market.
Louise Mentoor, Seeff’s manager for the Mitchells Plain area, where property values start between R200 000 and R350 000, said first-time buyers often did not understand the banks’ criteria for loans. But at the same time, the lack of transparency on the part of the banks when it came to bonds being declined was another real issue.
“While there is a great willingness to buy in the area (Mitchells Plain), we find that buyer education is still lacking. It is vital for buyers to take note of what they need to secure bond finance. Before shopping for a home, buyers should get the information on the bank requirements, and need to understand that it is a tedious process.
“A good credit record is vital, as is the necessary paperwork and having cash available for a deposit and transaction costs,” said Mentoor.
She added that they could receive 10 offers for a single property, but that only one would be approved by a bank, and this might be at 80 percent of the asking price.
“While tightening of the credit granting criteria following the introduction of credit regulations has been necessary, the outlook is now too conservative. There is generally also a lack of transparency when it comes to reasons for bond declines. More disclosure from banks will enable real estate to better guide buyers and also sellers in terms of issues such as pricing and sellability.”
To compensate for reduced approvals, buyers often have to look at taking a personal loan to meet the asking price, which put them further into debt.
This may lead to many buyers giving up on owning property, choosing instead to continue renting, Mentoor said.