Low interest rates and bank lending both contribute significantly to the influx of first-time homebuyers in South Africa, says chief executive of the Pam Golding Property group, Dr Andrew Golding.
Golding observed that the average price paid by first-time homeowners, who are typically 34 or 35 years of age but can range from the early 20s upwards, surpassed the R1 million mark for the first time on record in January 2020. It then hit a slight decline before peaking in June 2020 as the lockdown regulations began to ease.
According to BusinessTech, the average price paid by a first-time homebuyer skyrocketed to a new record high of R1.138 million in January 2021, and then eased back to R1.12 million three months later in April.
“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,” he added.
Pam Golding Properties senior research analyst, Sandra Gordon, said that 100% bond applications have been rising progressively since early in 2016 before reaching a peak of 67.5% in June 2020.
As these applications surged between May 2020 and August 2020, the peak in June reflected the demand as buyers took advantage of the aggressive interest rate cuts before beginning to ease again.
Golding also commented on the increase in average prices paid for houses, not only aimed towards first-time buyers but including the overall population. He said that this reflected in the sharp acceleration of growth in housing prices which moved into the double digits for first-time buyers in September 2020, and for all buyers in January 2021.
“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,” Golding said.