The Secrets to First-Time Buyer Success
Although fewer young people are buying homes than a decade ago, more buyers under the age of 35 are investing in property as single owners and many are spending their money on sectional title properties.
08/11/2023
Greater Pretoria, Johannesburg,
Western Cape and KwaZulu-Natal have the most new
buyers applying for home loans, accounting for
80% of BetterBond first-time home loan
applications in the past year, says Bradd
Bendall, BetterBond Head of Sales.
‘Overall, first-time buyers have retained a
share of more than 60% of BetterBond home loan
applications over the past 12 months, with most
of the buying activity concentrated in regions
that are home to the country’s largest
metropolitan municipalities,’ Bendall adds.
Source: BetterBond Property Brief, Oct 2023
Although fewer young people are buying homes
than a decade ago, more buyers under the age of
35 are investing in property as single owners
and many are spending their money on sectional
title properties.
‘Affordability may have
been eroded through increased home loan
repayments in recent months, on the back of
rising interest rates, but there has been
positive growth in job creation in the formal
sector, as you’ll see in our October BetterBond
Property Brief,’ says Bendall. ‘Along with
indications that we could see a relaxation of
the monetary policy by the SA Reserve Bank, this
could result in renewed activity from first-time
buyers over the next few months.’
Ways
for first-time buyers to invest in property
include:
A helping hand
First-time buyers with a gross monthly household income of between R3 501 and R22 000 could qualify for the government’s Help Me Buy a Home programme (formerly FLISP). Lightstone data for June 2023 shows more young buyers opting for properties as single owners. In 2012, 69% of younger buyers were single owners, whereas this figure has now increased to just under 75%.
‘Buying property is a big investment and it comes with additional costs. However, there are still ways for young buyers to invest in property, even if they may not have the financial resources to save a 10% deposit, or afford cannot afford transfer duty on a property."
Buying a home of less than R1.1 million,
which is the transfer duty threshold, will mean
a considerable saving for a first-time buyer.
Lightstone reports that 44% of sales to buyers
under the age of 35 were in the R500 000 to R1
million price range.
Another option is to
buy in a new development where transfer duty
does not apply. The big banks in South Africa
offer a range of home loan products that include
loans of as much as 110% for young professionals
under the age of 30.
‘A loan of 100% or
more makes it possible to buy a home without a
deposit, and it could also cover transfer and
bond registration fees, which brings home buying
into reach for this important buyer segment,’
says Bendall.
Stronger together
Collective saving schemes, ‘stokvels’, have become an increasingly popular way to buy property. Some of the big banks, like FNB and ABSA, have launched a collective buying home loan scheme which allows up to 12 people to buy property together. Each person contributes towards the monthly repayments. ‘All applicants remain jointly and severally liable for the home loan repayments, so be clear about financial responsibilities before joining a property investment stokvel, but it can be a very empowering way of purchasing property,’ advises Bendall.
In partnership
You don’t have
to put a ring on it to own property with your
partner! Joint bond ownership allows at least
two parties to apply for a bond together. It
could be a partner, a friend, or a family
member. While there are many benefits –
including shared costs and other
responsibilities – it is important to be aware
of the risks as well. If one of the bond holders
pulls out, the other party will be responsible
for repaying the bond.
‘The income and
credit scores of all parties applying for the
home loan will be considered and reviewed. While
banks favour joint bonds as it means less risk,
it is still important for all those involved to
have a good credit record. As with any
collective agreement, it's advisable to set out
the conditions and expectations in writing so
that there are no nasty surprises if
circumstances change,’ says Bendall.
There is a way
Buying property is an exciting
investment, regardless of whether you are a
first-time buyer looking to get a foot on the
property ladder, or a seasoned investor who
wants to expand your portfolio. ‘Working with a
bond originator who can negotiate with more than
one bank on your behalf is an excellent place to
start your home buying journey. This service is
completely free to home buyers, and you can be
pre-approved for a home loan online at a time
that is convenient for you. By understanding the
various financial options available, and with a
little help from the experts, it is definitely
still possible for first-timers to buy a home of
their own,’ says Bendall.