Advice and Opinion

Substantial increase in home loans over R900K says BetterLife

Shaun Rademeyer, CEO of Betterbond.
Shaun Rademeyer, CEO of Betterbond.

According to the latest statistics from BetterLife Home Loans, there has been a substantial increase over the past 12 months in the percentage of home loans being granted for more than R900 000, which is the new Transfer Duty threshold announced during the Budget Speech in February.

CEO Shaun Rademeyer says the figures show that 47% of the loans granted in the year to end-February fell into this category – up from 43,5% in the previous 12 months – while the average purchase price nationally was R1,1m, or 9% higher year-on-year.

“Of the loans granted in the price brackets above R900 000, the biggest share (26%) went to home buyers who were purchasing for between R900 000 and R1,5m, 15% to buyers in the R1,5m to R2,5m category and 6% to those purchasing for more than R2,5m”.

“This is a strong indicator of the increasing confidence that buyers in these higher price ranges have in the property market, especially if one considers that they are generally repeat buyers who are committing large amounts of their own money to these transactions.”

He says the BetterLife statistics also reveal that during the 12 months to end-February there has in fact been an across the board increase in the percentage of buyers choosing to pay deposits equal to 30% or more of the purchase price.

“Indeed, the percentage of loans granted to buyers with deposits of 40% or more has risen over the past two years from 11,5% to 13,2% – while the percentage of loans going to buyers paying deposits of 10% to 20% of the purchase price has declined, from 24,3% to 22,5%.”

The other side of this coin, of course, is that there has been a year-on-year decline in the percentage of loans being granted for homes costing less than R900 000, indicating a decline in affordability among buyers in this category.

“These are mostly first-time buyers in their 20s and early-30s who have a monthly household income of between R15 000 and R40 000 and have come under severe financial pressure during the past 12 months, which has made it difficult for them to qualify for home loans”, says Rademeyer.

“However, it is important to note that this has not dampened their enthusiasm for home ownership, as reflected in the fact that the percentage of home loan applications received from first-time buyers has actually increased during this period, from 46% to 47% of the total.”

“In addition, the average purchase price paid by first-time buyers has risen by almost 5% in the past 12 months, while the average percentage of purchase price paid as a deposit has increased from 11,5% to 12%.”

This trend has been bolstered in recent months, he says, by lower fuel and food prices thanks to a stronger Rand and good rains that have broken the drought, “and now we expect it to be given further impetus by the new Transfer Duty exemption – provided that the Reserve Bank is able to keep interest rates at their current levels.

“Nevertheless, the banks remain extremely cautious about granting credit, so prospective buyers applying for home loans are well advised to do so through a reputable originator”.

*The BetterLife Home Loans statistics represent 25% of all residential bonds being registered in the Deeds Office and are thus a reliable indicator of the state of South Africa’s residential property market.