Despite record-high interest rates, Standard Bank has observed a resurgence in first-time homebuyer activity in South Africa, potentially driven by expectations of imminent interest rate cuts.
In May, nearly 50% of home loans registered by Standard Bank were taken out by first-time buyers. This includes all approved home loans where at least one applicant was purchasing their first home. The volume of applications from first-time buyers also increased in April and May, following a notable decline in the last months of 2023 into 2024.
Standard Bank’s data indicates a recovery in the first-time homebuyers’ market since the first quarter when the ooba Home Loans’ oobarometer indicated that the proportion of applications from these buyers had dropped to a low of 46%.
“It is encouraging to see a growing proportion of first-time buyers in our book. As the leading lender for first-time homebuyers, we have maintained a steady risk appetite to ensure ongoing support for aspirant homeowners. The rise in applications and loans directed towards first-time buyers shows the market's recognition and appreciation of our commitment,” says the Head of Standard Bank Home Services, Toni Anderson.
Standard Bank offers home loans of more than 100% of the purchase price to qualifying first-time homebuyers to help cover upfront costs like bond registration and transfer fees. For clients needing assistance with upfront costs, the average loan-to-value ratio – which indicates the approved home loan relative to the purchase price – increased in the latter part of 2023.
Notable trends from Standard Bank's data on first-time homebuyers include:
48% of all bond registrations by Standard Bank in the past five years involved first-time buyers.
In the past year, Standard Bank approved an average of 50% of all applications it received from first-time homebuyers.
The average loan value approved for all first-time buyers in the past three years stood at R975,000.
Four in ten first-time buyers had a deposit, with the average deposit being 24% of the selling price.
Gauteng, Western Cape, and KwaZulu-Natal represent the top three provinces for first-time buyer activity.
Gauteng, Western Cape and KwaZulu Natal represent the top three provinces for first-time buyer activity.
Lightstone data revealed that home purchases in South Africa have declined by 13% over the past five years, with a significant drop in the buying activity of individuals aged 26 to 35.
Between 2018 and 2023, home sales to this demographic decreased by 25%, making up only 27% of total property purchases in 2023.
This decline is largely due to young adults' sensitivity to interest-rate hikes, with many anticipating potential rate cuts in late 2024. Additionally, the average age of first-time homebuyers has risen by three years over the past decade, now at 36.
The volume of home-loan applications from first-time buyers has decreased from 56% in June 2020 to 46% in May 2024.
Despite this, a notable portion of younger buyers are leveraging property as a wealth-building strategy, with 15.3% of buyers aged 18 to 25 being repeat buyers.
First-time buyers seeking affordable housing are particularly attracted to traditional township property markets, where most transactions occur around the R750,000 price point.
Less than 14% of BetterBond's registered bonds in these areas between January and May 2023 exceeded R1 million, with only one surpassing R2 million.
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