Advice and Opinion

Current market ‘looking up’ for first-time buyers

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

Things are looking up again for first-time home buyers in the current market, says Shaun Rademeyer, CEO of BetterBond.

“The slight decrease in interest rates in July means that it is easier to qualify for home loans – and there may be further decreases later this year. At the same time, the rate of house price growth over the past twelve months is has been considerably slower than the rate of salary growth, and now our statistics show that there has been a significant increase in the number of 100% home loans, the majority of which always go to first-time buyers in the lower income brackets.”

Specifically, the Betterbond statistics* show that the average price in the first-time buyer sector of the market increased by just 4,3% in the twelve months to end-July (compared to 5,6% in the previous twelve months), while the latest available Bankserve figures put the rate of salary growth in the twelve months to end-Jun at 6,7%.

Meanwhile the percentage of home loans being granted for 100% of the purchase price has risen from 39% to 41% in the past twelve months, while the percentage of loans being granted to buyers with deposit of 10% or less has risen from 8,5% of all loans to 9,5%.

“Contrary to our expectations for the current market phase, the percentage of home loan applications submitted by first-time buyers also showed a year-on-year increase in July to 47,7% (from 46,1%),” says Rademeyer, “and the percentage of approvals that went to first-time buyers also improved, from 38% to 39%”.

“There is no denying, however, that the political and economic upheavals of the past few months have taken a toll on the real estate market as a whole, with the total number of home loan applications showing a year-on-year decline in July of 6,2% and the total number of approvals dropping by 5,5%.”

The good news, however, is that current home loan applicants are generally in better financial shape, he says, in the sense that many have spent time paying off other debts so that they have more discretionary income with which to pay home loan installments. In addition, prices as a whole have increased by an average of just 2,5% over the past twelve months, compared with 9,1% in the previous twelve months.

“As a result, the percentage of applications that are declined outright by the banks has fallen from 27% to 25% in the past 12 months, while the percentage of immediate approvals has risen from 33,7% to 36%. The percentage of applications that are initially declined but are then “rescued” by us has remained the same at 40%”.