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Young South Africans are defying rising living costs and buying their first homes

Data shows that the number of first-time property buyers in May 2022 was the same as the number in May 2021.Photo: RODNAE Productions/Pexels

Data shows that the number of first-time property buyers in May 2022 was the same as the number in May 2021.Photo: RODNAE Productions/Pexels

Published Jun 7, 2022

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Rising interest rates, fuel prices, and cost of living may be deterring many aspiring home owners from taking the plunge and buying property, but favourable bank lending is said to be in their favour.

Interest rates are also still relatively low, despite the ongoing hikes.

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Comcorp Mortgage Software data for May shows that 71.3% of property buyers were first-timers, a figure that is almost identical to the 71.32% in May 2021. The average age of first-time bond applicants was 37 and the average approved loan to value ratio was 90%.

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The statistics also show that the average purchase price for first-time buyers was R940 232, with the average deposit being R101 160. In May 2021 these figures were R936 827 and R97 083 respectively. The prime lending rate a year ago was, however, 7% compared to May 2022’s 8.25%.

First-time property buyers continue to dominate activity in the residential market despite recent interest rate hikes, says Samuel Seeff, chairman of the Seeff Property Group, explaining that this is being driven by the “favourable mortgage lending climate and low interest rate which, despite the 125bps hikes this year, remains well below the pre-pandemic level”.

He says the levels of buying among people under 35-years-old – as reflected in the Deeds Office data, is still high, with these buyers comprising more than one third of activity of the past year in the metros and big cities.

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“This includes Johannesburg (33%), Soweto (27%), East Rand (56%), Pretoria (34%), Cape Town (32%), Durban (31%), Gqeberha (30%), and Bloemfontein (35%).”

Home loan approvals, Seeff says, are at “the fastest rates in over a decade”, and deposit requirements are now down to around 6% to 7% as the banks compete fiercely for a slice of the home loans market.

He adds that first-time buyers are still able to secure 100% bonds plus costs in many instances and that this has been “an enormous benefit”.

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Nick Pearson, chief executive of Tyson Properties, says the positive price bands are at the top and bottom ends of the market, with first-time buyers “propping up the market and creating the perfect supply demand scenario”.

Properties priced at around R1.2 million – which are the ones that the average South African buyer can afford – are still selling quite quickly.

“We’ve had good results coming out of Johannesburg this year. It is probably the most stable market when it comes to properties priced between R1.2m and R3m. We are seeing a huge amount of first-time buyers in this market. We’ve seen semigration as people move from the suburbs to estates with the emerging buyers of yesteryear becoming repeat buyers who are now purchasing these larger properties.”

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First-time buyer advice

Jacques van Embden, managing director at Blok, advises first-time buyers to check their affordability, both in the capital purchase as well as in the monthly serviceability.

“Getting your purchase wrong will cost you money (as selling has many frictional costs to consider. Use great websites...to ensure you know about the transfer fees and transfer duty – included in the price if you buy from a developer, and then ensure you have enough spare income to cover some increase in the current lending rates. Whilst I believe they will remain well below historic levels, they will rise in the year ahead.”

When looking for the right property, he says buyers should start off by looking at the community in which they will be living as this, and the surrounds, will “significantly impact” their quality of life.

Buyers should also consider investing in micro or studio apartments, van Embden notes, adding that international trends reveal that people are more interested in getting into the top lifestyle suburbs and the broader eco-system than they are about the size of their home. Therefore, the facilities and living options available in an urban setting more than compensate for a smaller private home space.

“This is being combined with modern buildings – the most likely place to find a studio/micro – which, when well designed, include excellent amenities like rooftop pools, deli’s, gyms, and access into the community that lives in the building as well, meaning this new product market is set for major growth.”

He adds that the age-old adage of location, location, location, still rings true: “Property is a long term holding asset meaning that you have to be sure that where your home/investment is located is an area that will consistently be in demand, or that you will love it, if you are buying to live. If you are not sure then your investment could disappoint or you won’t enjoy living in your new home.”

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