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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Bond applications reached their highest level in three years and bond approvals were at the highest value since October 2008 according to figures released.

The statistics showed that the average number of bond applications in March was 36% higher that the average monthly number of applications in 2010. However, the figures represent just 36% of the applications recorded when the property market was at its peak in May 2007.

Saul Geffen, says that the organisation has experienced consistent month-on-month growth in applications for mortgage finance since the beginning of the current year.

“February was significantly higher and March was even better than that,” he says, adding that expected the number of bond applications to continue increasing over the next few months.

He says that the reduction of interest rates – which have fallen by 650 basis points since 2008 – was certainly a contributory factor. “Interest rates are at a 30-year low and this has improved affordability of homes for thousands of people,” he says.

He points out that the low interest rates, improved affordability, subdued property price rises, low inflation rates and real wage growth combined to create a more favourable environment for homebuyers.

“The relaxation of the lending criteria by some banks has contributed to the rise in applications and approvals because the ability to obtain financing remains one of the biggest drivers for the property market,” he added.

Meanwhile, First National Bank suggest that the South African rental market has remained relatively flat for the first quarter of this year but available data suggests there may be some improvement in the demand for rental accommodation.

Property strategist John Loos says it is difficult to determine the level of rental demand in the current economic cycle but household financial pressure could be a positive factor for the rental market because it could increase the appeal of renting for certain households.

He says that the percentage of home sellers who are looking to downscale – mainly because of financial pressures – remains high at about 22% of the market and many sellers are opting to rent a property rather than buy something at this stage.

Loos says that the average rental for flats in major cities has increased with a year-on-year increase of 16,2% for the fourth quarter of last year.- property24.com

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