Exciting Opportunities for First-Time Homebuyers in South Africa's Property Market

According to recent data from BetterBond, there has been a consistent number of home loan applications in the past year, and first-time homebuyers may find favourable buying opportunities in the short-medium term.
 

Factors Influencing the Property Market and First-Time Buyers

In their latest property brief for June, BetterBond reported a decline in inflation but noted the South African Reserve Bank (SARB) raised the interest rate by 50 basis points.

Yet, despite South Africans' optimism regarding the decrease in the Consumer Price Index, which has now fallen below 7% and signalled an end to the continuous cycle of interest rate hikes, there is a possibility of a revitalised property market later this year and throughout 2024.

BetterBond highlighted declining new home loan applications, particularly among first-time buyers. They emphasised this should be viewed in the context of a 68% increase in the cost of servicing debt since November 2021.

However, the group also mentioned the combination of significant job creation in the first quarter of 2023, and thus the downward trend in the inflation rate could bring relief to homebuyers.
 

Average Home Purchase Prices Show Stability for First-Time Buyers

For first-time homebuyers, the average home purchase price has consistently remained lower than most buyers, averaging around R1.2 million. This is R300,000 less than the average price for those who have previously purchased a home, which is R1.5 million.

A 3% increase was reported in the average home price during the first five months of 2023 compared to the first quarter of 2022. However, there was a slight decline in the average home price for first-time buyers over the 12 months leading up to May 2023.
 
Nevertheless, it remained relatively stable and comparable to the year-on-year average.
Based on the data, the top three regions in South Africa (in terms of the average home loan value for first-time homebuyers over the past 12 months) are the Western Cape, Pretoria, and Mpumalanga. 

This trend again suggests that semigration is spreading beyond the coastal provinces, as Mpumalanga has surpassed KwaZulu-Natal and the North-Western suburbs of Johannesburg.
 

The graph below demonstrates this trend

Image Source: Businesstech.co.za

More than half (52%) of all home loan applications from first-time buyers are from Gauteng.

Significant challenges affecting younger generations in purchasing a home were also noted, including youth unemployment, student debt, lack of credit history, and dangerous jobs.

Economist Roelof Botha suggested that the 250,000 new jobs created in South Africa during Q1 2023 may increase the possibility of newcomers entering the property market.
 

Millennials and Gen-Z Homebuyers Embrace Homeownership for Equity-Building

While millennials and Gen-Z homebuyers still desire homeownership, they view it more as a means of building equity. They noted being unable to save a deposit is not necessarily a deal-breaker, as some banks offer 105% and 110% bonds. BetterBond also mentioned the record-high 35-year mortgages in the UK as lenders strive to attract young homebuyers amid rising interest rates.

Although first-time homebuyers have experienced a decline in new loan applications, it is essential to consider the significant increase in the cost of servicing debt. However, with substantial job creation and a downward trend in inflation, there is hope for relief in the housing market.

Visit our website https://www.homesofdistinction.co.za/agents/ or pop by our offices for a chat. Our friendly property practitioners are always available to assist in this regard.

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