The average age of first-time homebuyers in South Africa – and how much they are paying for their homes

The average age of first-time homebuyers in South Africa – and how much they are paying for their homes
Written by Learnersgist

South Africa’s historically low interest rates and increased lending appetite from banks has led to an influx of first-time homebuyers, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

Golding said that the country’s first-time buyers are typically 34 or 35 years of age, but that this ranges from the early 20s upwards.

He added that 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).

“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,” Golding said.

“Of further benefit to first-time buyers is that mortgage approval rates have been rising steadily from a mid-2016 cyclical low.”

Golding cited data from bond originator 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 before 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, said Golding.

“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.”

100% bonds 

Sandra Gordon, Pam Golding Properties senior research analyst, said that 100% bond applications have been rising steadily since early-2016 before reaching a peak in June 2020 – when pent-up demand was initially at its peak in the wake of the easing of lockdown regulations.

Such applications surged between May 2020 and August 2020 – peaking at 67.5% in June 2020, reflecting pent-up demand as buyers took advantage of the aggressive interest rate cuts, before applications began to ease, as the full economic impact of the lockdown began to emerge.

Approval rates for 100% loan to value bonds for all buyers in general and first-time buyers, in particular, have followed broadly similar trends, she said.

Commenting on the increase in the average house prices paid, both overall and for first-time buyers, Dr Golding said this is reflected in the sharp acceleration in the growth in house prices, which for first-time buyers moved into double-digit territory in September 2020, and for prices paid by all buyers in January 2021.

“Double-digit growth in house prices was last recorded briefly in 2010 and again in 2015/16. The current robust growth in average and first-time home buyer prices is similar to the surge in prices in the wake of the global financial crisis and subsequent recession.

“However, a key difference is that, during the global financial crisis, house prices were actually declining from year-earlier levels, before the 2009/10 recovery in prices,” said Golding.

“Given the weak state of the South African economy before the onset of Covid-19, the current strong growth in house prices is undoubtedly attributable to the aggressive interest rate cuts last year and a strong appetite for mortgage extension by local financial institutions.”

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