Consumers in the upper income groups may be scaling down and buying less expensive homes, but those in the lower income groups continue to pay more for their properties, according to the latest statistics* from BetterBond, SA’s biggest bond originator.
The figures show, says CEO Rudi Botha, that the average home purchase price paid has declined over the past 12 months in all income categories above R35 000 a month, with the biggest decrease (2,4%) being among individuals who earn between R35 000 and R40 000 a month.
“And we believe there are two reasons for this, the first being that sellers are more willing to negotiate price at the moment. In fact, according to the latest FNB Property Barometer, some 91% of sellers are currently agreeing to an average 8% drop in their asking prices in order to secure their sale.
“The second reason is the mounting cost of operating and maintaining a home, thanks to rising property taxes, municipal service charges and security fees. Many higher-end homeowners are trying to contain this now by downscaling to smaller properties.”
Meanwhile, the average home purchase price paid has increased over the past 12 months in all income categories between R15 000 and R35 000 a month, with the biggest increase (8,6%) occurring among individuals who earn between R15 000 a R20 000 a month.
Botha says this pattern reflects the preference that lower income buyers have for homes in new developments where above-inflation increases in building input costs continue to drive up prices, but their maintenance costs over the first few years of home ownership are likely to be minimal.
“More importantly, though, it reflects better access to home loans. Buyers in these income brackets are generally young, first-time purchasers who struggle to save even a 10% deposit, but we have seen the average size of their approved bonds increase by 11% over the past 12 months, compared to a 10% increase in the average purchase price.”
In other words, he says, the banks are going out of their way to try to approve home loans, without relaxing the strict credit criteria imposed by the National Credit Act to prevent borrowers from getting into financial trouble.
“Further evidence of this is the fact that BetterBond has been able to secure approvals for more than 80% of applications submitted over the past 12 months, compared to 76% in the previous 12 months. In addition, the number of loans granted for 100% of the property purchase price – most of which go to borrowers earning less than R15 000 a month and buying “affordable” homes – has increased by 8% in the past 12 months.”
The BetterBond statistics also show increases, says Botha, in the percentage of loans being granted for the purchase of vacant land, for building and for home improvements.
“This indicates a bigger percentage of prospective homeowners who are acquiring land and building their own homes, as well as a bigger percentage of existing owners who are seeking to increase the value of their properties. And both trends bode well for the future of the market as they indicate consumers who are willing to invest in real estate.”