Interesting buying trends have emerged over the last three months, showing that the number of first time buyer home loan applications seems to be tapering off, while older buyers are spending more, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
Goslett notes that according to the BetterLife Home Loans statistics for the RE/MAX group for the period June-August 2015, there has been a decline in home loan applications from first time buyers, while the average deposit requirement for first time buyers has increased from just over 10% in June to 13.68% in August. The average loan-to-value offered to first time buyers has also dropped from 91% in June to 88% in August. Analysis of all home loan applications received by BetterLife Home Loans from RE/MAX reflects that overall loan-to-value ratios have decreased from around 86% to just above 84%, while average deposit requirements have increased from 19% to just over 21%.
“Despite a slight increase in average salaries of the applicants, the cost of living has increased dramatically and many consumers are finding their budget’s stretched. That is why saving up for a property, or having a ‘rainy day fund’ savings account when you own a property is important,” says Goslett. “In light of interest rate hikes and a constrained economy, it is not surprising that the loan-to-value average has decreased slightly or that the deposit requirements have increased.”
Looking at buying trends, Goslett points out that the majority of home loans granted through BetterLife Home Loans for RE/MAX applicants has been for homes within the R500 000 to R1million price range (41%), while 21% of home loans granted were for properties priced between R1million and R1.5million. Those properties priced between R1.5million and R2.5million accounted for just 16% of home loans granted to RE/MAX buyers.
Provincially, properties within the Western Cape had the highest average purchase price among all the provinces for the period June to August 2015 at R1.576 million. Interestingly, it was Mpumalanga that followed at R1.345 million, then the Free State at R1.277million, while the average purchase price for property in KwaZulu-Natal during the June-August period was R1,164million. Surprisingly Gauteng lagged behind with an average purchase price of R1.16million.
While the average age of buyers applying for home loans remains at the 37 year old mark, the more mature generations continue to have greater buying power. The BetterLife Home Loan statistics for RE/MAX buyers between June and August show that buyers in their 50s spent an average of R1.479million on a property, which is 60% more than what those in the 20-30 year old age bracket spent (R924 771).
“This trend is understandable as older buyers have a lifetime’s worth of income and investment growth to utilise. Buyers in their 20s are typically just starting out in life and therefore their access to credit is defined by what they earn as they typically won’t have made any major investments by that stage of their life,” says Goslett.
Based on applications for home loans received from RE/MAX, 98% were for standard home loans as opposed to for vacant land, further advances or building purposes.
“While the medium term economic outlook for South Africa may not be as rosy as any of us would like, property remains a good prospect for long-term investment,” Goslett concludes.
