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The BetterBond Property Brief: first-time buyers still in the lead

The BetterBond Property Brief: first-time buyers still in the lead

Staff writer

The October BetterBond Property Brief shows a positive quarter-on-quarter increase of 3% in the number of home loan applications between July and September 2023 (figure 1), which could signal a bottoming out of the downward trend that kicked in Q4 2021 when the Reserve Bank Monetary Policy Committee (MPC) embarked on its restrictive approach.

Although the year-on-year figure is down 20%, inflation is now firmly under control and close to the mid-point of the Reserve Bank target range. The MPC is, therefore, running out of reasons to keep interest rates at 15-year highs and higher than pre-pandemic levels.

Should interest rates start coming down, it could herald an upswing in the residential property market.

First-time buyers are still in the lead

First-time buyers have retained a share of more than 60% of all home loan applications. While the Q3 2023 figure of 62.6% marks a slight decline from 65.3% in early 2021, the quarter-on-quarter increase of 1.3% (figure 5), albeit marginal, is a positive sign for this important segment of homebuyers.

First-time buyers’ affordability has been eroded through increased home loan repayments due to interest rates being at 15-year highs and remuneration levels in most sectors of the economy struggling to keep pace with inflation over the past 18 months.

Fortunately, formal sector job creation has continued positively in 2023, and the Reserve Bank’s relaxation of monetary policy could see renewed activity from first-time buyers.

First-time buyers qualify for smaller home loans

During the 12 months to September 2023, average home loan values for repeat buyers were significantly higher than for first-time buyers (figure 4). The largest differences were recorded in the Eastern Cape, followed by the north-western suburbs of Johannesburg and the North West province (specifically Rustenburg).

One of the reasons for this is most likely that repeat buyers enjoy larger collateral security and might have made a profit on previous homes, providing a larger measure of financial security when buying again. By contrast, first-time buyers are often more dependent upon financing their property purchase and, therefore, more prone to negative impacts from interest-rate rises like those experienced over the past two years.

Where are they buying?

During the 12 months to September 2023, first-time homebuyers were most active in the regions that are home to the largest metropolitan municipalities.

The BetterBond regions of Greater Pretoria, Johannesburg, Western Cape and KwaZulu-Natal accounted for 80% of home loans granted to first-time buyers (figure 6).

Apart from demographics, urban areas often contain a larger diversity of economic sectors and attract people with higher-paid skills.

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