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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.
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,’ Bendall adds.
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.
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.
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.