Property Barometer – How strong is 1st time buying really, and how bad is “buyer panic”?

As a percentage of total home buying, estate agents point to a healthy level of 1st time buying. But how strong is this source of demand? In reality, the relatively in-affordable post-boom residential market remains low on overall transactions volumes, and young buyers have challenges.


According to the FNB Estate Agent Survey for the 4th quarter of 2015, 1st time home buying remains a very significant source of housing demand, accounting for an estimated 26% of total home buying. This is slightly higher than the 25% recorded in the previous quarter, and is the 2nd consecutive quarter in which the percentage has risen.

This percentage remains significantly improved from the 12% low reached around recession time back in 2008.

In a follow up question, agents were asked if 1st time buying behavior has changed in the past 6 months, to which 31% answer “yes” and 69% “no”.

Of those that answered “yes” a large portion point to 1st time buyers “having saved for a deposit”, and having “done their financial homework”. This has been a significant part of the “yes” answer for some years now, suggesting that gradually, after a return to widespread home loan deposit requirements back around 2008/9, a group of aspirant buyers had taken the time to make the necessary saving adjustments.

In a further follow up question, FNB tried to ascertain as to whether the agents perceptions regarding the level of “1st time buyer panic” in the market. 1st time buyer panic refers to when 1st time buyers become concerned with house price inflation, worrying that “if they don’t buy now they will never be able to afford a home in future”. This is important, because widespread buyer panic can cause a housing market’s price levels to “overshoot”, contributing strongly at times to house price “bubbles”.

The sample of agents’ surveyed has pointed to a very significant percentage of 1st time buyers suffering from “buyer panic”. In the latest survey, this estimate was 51% of 1st time buyers, slightly lower than the 54% in the previous quarter. This slightly lower percentage may point to the end of a prior rising trend in perceived buyer panic, but remains significant.

But how significant is the problem of 1st time “buyer panic” really? Probably not nearly as significant as what the estimated percentage suggests. That is because looking at percentages alone gives us perhaps an inflated opinion of how strong 1st time buying levels actually are.

What needs to be kept in mind is that overall volumes in the residential market these days remain relatively “thin” compared to the residential boom years back in last decade pre-2008.


Using Deeds Data, property transactions are identified by “Individuals”, or “Natural Persons” in Deeds Office language. On a 3-month moving average basis (for smoothing purposes), 23,363 such transactions per month in the 3rd quarter of 2015 were identified. This level is slightly more than one-third of the peak volumes touching above 60,000 back around late-2003 at the height of the residential boom. It even compares poorly with monthly average levels nearer to 50,000 at times in the late-1990s.

Much of this weakness in transaction volumes, that has persisted even despite some small improvement following the end of the 2008/9 recession, has to do with affordability matters, after a massive house price boom last decade. High price and transaction costs usually mean high overall total transaction values but low transaction volumes.

Now to younger buyers, many of which are 1st time buyers. This group is most sensitive to affordability changes. For the 3rd quarter of 2015, the monthly average number of transactions by individual property buyers under the age of 40 has been estimated to have been 10,409. This is roughly one-third of the peak level reached at a stage of 2006. This number not only compares poorly with the peak of the boom, but even with 1998 estimates that put the monthly average at nearer to 20,000.

This sharply lower number of below age 40 buyers today does not necessarily mean that the number of 1st time buyers is quite as sharply lower. It probably means that the average age of the 1st time buyer is older than was the case in the boom, or even compared to before the boom times when property was far cheaper. A significant portion of agents in the survey point to 1st time buyers as having saved for the deposit. In many instances that saving process would have taken a number of years, delaying the 1st purchase until an older age.

Noticeable, therefore, is that even in the thinner post-boom market, the estimated number of individual property buyers below age 30 has seen its percentage of the total transaction volumes declining from above 20% at a stage of 2002 to 13.77% by the 3rd quarter of 2015. The 30-39 year old buying group has also seen its percentage of total transaction volumes decline from estimates near to 35% in 2007, to nearer to 30% in the past few years.

And the result is that the average age of the individual property buyer remains well-elevated from 2007 levels of near to 40, with most recent estimates putting it above 43 years old.


In short, the FNB Estate Agent Survey continues to paint a good picture in terms of 1st time buying levels when expressed as a percentage of total home buying. It is, however, important to look at absolute levels along with percentages to complete the overall picture. It is difficult to accurately identify true 1st time buyers from Deeds data, but one can group buyers according to age. What is gleaned from this is that the average age of buyers became noticeably older following the end of the pre-2008 residential price boom. After the price boom, affordability was far more of a challenge for many young buyers compared with before the boom. The result in many cases would be aspirant 1st time buyers having to wait for a few years longer to buy than may have previously been the case, hence a likely older average age of 1st time buyer.

And then, it is also important to understand that overall individuals’ transaction volumes remain relatively low compared to the boom years and even to levels just before that. So, while the estimated 1st time buyer percentage is comparable with that back around 2004 at the height of the property boom, the absolute number of 1st time buyers would probably be nowhere near as high.

The past few years have no doubt been better for 1st time buyers than was the recession period of 2008/9. But affordability remains a challenge, and that is probably reflected in a considerably older average age of home buyer today.

On the positive side, when agents estimate a significant percentage of 1st time buyers to be suffering from “buyer panic”, it really isn’t that large in absolute number terms. By-and-large the market remains a “rational” one.

Read more here: FNB Property Barometer_FNB_EA_Survey_1st_Time_Buying_27_Jan_2016