Motivated by the prevailing, historically low interest rates and further incentivised by banks’ lending appetite and sound purchasing opportunities, South African first-time buyers across the country continue to capitalise on the favourable buying environment and demonstrate confidence in the residential property market by acquiring their own homes, says Dr Andrew Golding, chief executive of the Pam Golding Property group.Says Dr Golding: “With first-time buyers typically 34/35 years of age, but ranging mainly from their early 20s upwards, the average price of a home purchased by first-time buyers has been rising steadily, according to data collected by ooba. Notably, in this market, the average price paid by first-time homeowners broke above the R1 million mark for the first time on record in January 2020, then declined marginally before surging in June 2020 as the hard lockdown regulations were eased. In January this year (2021), the average price paid by a first-time home buyer rose to a new record high of R1.138 million before easing back to R1.12 million in April (2021).
Location and convenience probably top the priority list for many of today’s first-time home buyers. While a modern home is first prize for those with the means to purchase it, young first-time buyers are often not averse to buying a more affordable property which needs some work, as long as the location and the price are right. Many who were previously renting have grasped the opportunity to gain a foothold on the property ladder, having realised they can now afford such an investment in their future even at a lower monthly cost than their current rental payments.
Of further benefit to first-time buyers is that mortgage approval rates have been rising steadily from a mid-2016 cyclical low. Looking at the data on the graph below from ooba, which shows smoothed (six-month moving average) approval rates, both overall and first-time approval rates peaked in February 2020 at 85.1% and 83.0% respectively, just prior to the initial lockdown. Since then, approval rates for both the first-time buyer and all buyers overall have declined slightly, which may simply be attributable to a marked increase in the number of applications received rather than a deteriorating appetite for lending.
The fact is, approval ratings remain elevated when compared to prior years, suggesting that the aggressive interest rate cuts in the first half of 2020 have ensured that more applicants are now eligible for a mortgage than was previously the case.”