First-time buyers ‘return’ to property market

First-time buyers are making a steady return to the residential property market in South Africa, according to new statistics, which show that they are responsible for almost half of all home loan applications.

The research by ooba, SA’s bond originator, reveals that, in 2010, the proportion of first-time buyers as a percentage of total applications increased to 47,61%. This is the highest total since ooba began tracking the statistics, and is a 15,96% increase on the proportion of first-time buyers since these records began in July 2005.

According to Saul Geffen, CE of ooba, the change in profile of home buyers would signify a positive development for the local housing market.

“Higher levels of activity among first-time buyers are generally a positive indicator for the housing market, as demand increases and there are positive knock-on effects,” Geffen says.

He explains that a factor in the increased proportion of first-time buyers would be the reduction in the number of property investors.


“With capital growth having curtailed, and buy-to-let investors having fallen away considerably, the relative proportion of first-time buyers would naturally increase,” he says. “Further, as lending and economic conditions have been tough, existing homeowners have tended to hold on to their properties and renovate rather than trade up.”

He says the reduction in interest rates of 650 basis points since 2008 will also have been a contributing factor to the increase in first-time homebuyers. “With rates now standing at a 30-year low, improved affordability has enabled many would-be homeowners to take the leap, as the cost of servicing a bond has reduced considerably.

“This, combined with the easing in lending conditions, relatively low property price growth compared with recent years, low inflation rates and some real wage growth, combine to make this a favourable environment for the first-time buyer to get onto the property ladder,” says Geffen.

He says possible first-time buyers should aim to put down a deposit as those who do so are more likely to get their home loan approved and also obtain a more favourable interest rate on their bond.

“Homebuyers with a deposit have a much greater chance of home loan approval at favourable interest rates.” — I-Net Bridge

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