The slowdown in the residential property price growth is providing first time buyers with an opportunity to enter the property market.

According to Rhys Dyer, the average first time buyer’s purchase price has seen consistent growth in the past quarter.

This, he says is due to the low interest rates combined with the ongoing easing in lending conditions, especially in regard to deposit requirements.

“Higher levels of activity among first time buyers are generally a positive indicator for the housing market,” says Dyer.

The price index, recorded a negative year-on-year price growth of 3.4 percent to R 821 579 in July 2011 from R 850 763 in July 2010.

However, the July first-time buyer’s purchase price figures show a 3 percent year-on-year growth to R 609 417.

Dyer says 49.3 percent of home loan applications finalised  from January to July 2011 are for first time homebuyers.  This is up 2.3 percent from the same period last year.

Sean McCauley, Rawson Properties director says according to the FNB Property Barometer, the number of first time home buyers has increased.

He says first time buyers comprise 25 percent of residential property buyers and this is the highest level achieved for first time buyers for at least five years.

“In 2008, a boom time in property, only 15 percent of buyers were first timers, therefore the growth has been in the region of 66 percent,” says McCauley.

He explains that the increase in the number of first time buyers has probably contributed to the average house price moving upwards, albeit slowly.

“It has now reached the point where at R803 751 the national average house price has broken through the R800 000 barrier for the first time.”

An increase in the number of loans being granted by the banks and the raising of the transfer duty tax exemption to homes sold for up to R600 000, had undoubtedly been a prime cause in the rise of first time buyers, he says.

“The low interest rates (the lowest in 35 years) and the fact that home prices are now very well priced have a positive effect on the residential property market.”

He notes that the rise in first time home buyers appears to be closely linked to the growth of the middle class.

“We find that property is still seen by the middle class homeowners in South Africa as the safest and most desirable asset class,” he adds.

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Banks lent even less money to people wanting to buy a home in February and statistics show that mortgage advances declined from 3,8% in January to just 3,4% in February according to data released by the South African Reserve Bank.

Outstanding mortgage balances in the household sector increased by 4,1% year-on-year in February after rising 4,6% in January. On a monthly basis, household mortgage balances were up by R2,8-billion in February compared with the previous month.

According to Jacques du Toit, senior property analyst at Absa Home Loans, the declining trend in mortgage advances is believed to be related to various factors including the ratio of household debt to disposable income that was at 77,6% at the end of last year.

“The percentage of credit-active consumers with impaired credit ratings remained high at 46,5%, in the final quarter of 2010 and this situation impacts on the consumers’ ability to take up credit against the background of the National Credit Act. Moreover, the banks’ lending criteria remained strict,” says Du Toit.

He says that significant increases in the fuel price and rising food inflation are also having an impact on consumers emphasised by the fact that consumer confidence had fallen in the first quarter of this year.

Total mortgage advance reach R1 047,6-billion in February this year, while mortgage advances to households at the end of February were at R764,2-billion equivalent to 73% of the total.

Du Toit says that mortgage advances growth is forecast to remain in single digits for the rest of this year.

“The cost of servicing household mortgage debt as a percentage of disposable income was around 4,3% in the last quarter of 2010. This was the net result of trends in growth of household mortgage debt – that increased by 0,9% during the period – and a lower mortgage interest rate,” says Du Toit.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

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