The number of black people entering the South African residential property market is said to have increased as the socio-economic tables turn.
Black buyers only represent 39 percent of the number of the total approved home loans, while whites represent 47 percent of the total number of approved home loans.
According to bond originator ooba, the number of home loan applications by black people already exceeds that of their white counterparts.
Black home buyers currently represent 45 percent of total home loan applications while applications submitted by white home buyers represents only 41 percent of the total number of home loan applications, says Saul Geffen, chief executive officer of ooba.
“Black buyers only represent 39 percent of the number of the total approved home loans, while whites represent 47 percent of the total number of approved home loans.”
He says this ratio has changed considerably since last year, where blacks only represented 30 percent and whites 56 percent of approved home loans.
Geffen explains that when it comes to first-time homebuyers, the trend is clearly in favour of black applicants.
First-time homebuyers represent 49 percent of the total number of applications and 44 percent in approved loans.
Of these first-time applications, 59 percent of the total numbers are for black applicants compared to 27 percent for white applicants.
When it comes to approved home loans, 55 percent of the total numbers of first-time homebuyer approved loans are for black applicants compared to 31 percent for whites. In 2010, black applicants only represented 48 percent and white applicants 36 percent of approved home loans.
Geffen says that the higher levels and sustained increases in black buyers can be attributed to the changing economic demographic in South Africa and the fact that purchasing levels are currently higher at the lower to middle income levels and for first-time buyers.
“The improved property market conditions play a role resulting in increased affordability.”
The shifting economic base in South Africa, largely influenced by the emerging black middle class means the racial demographic of homebuyers is changing, he says.
The latest statistics also reveal that applications by Asian and coloured applicants remained steady year-on-year at around 8 percent and 5 percent respectively.
Geffen says the growth in first-time applications from black applicants can be attributed to improved property market conditions, a reduction in interest rates of 650 basis points since 2008, coupled with subdued property price inflation, improved bank approval rates and lower deposit requirements.
He says that first-time home buyers looking to take advantage of the favourable market should ensure that they have sufficient deposit to put down as it will result in a more favourable interest rate which significantly reduces the total cost over the term of the loan.
Geffen says that first-time home buyers looking to take advantage of the favourable market should ensure that they have sufficient deposit to put down as it will result in a more favourable interest rate, which significantly reduces the total cost over the term of the loan.
“A meaningful deposit significantly improves a buyer’s chance of getting a home loan approved.”
A positive credit profile and a stable employment history boost the chances of a successful bond application.
Geffen says that it is strongly advisable that buyers are pre-qualified when looking for a new home.
“This will give the buyer a good sense as to the value of the property they can afford to purchase.”
The pre-qualification process can also pick up issues on credit records that will need to be addressed before formally applying to a bank.
The process not only streamlines the home buying process, but also ensures that the buyer is able to negotiate from a position of strength, he adds. – Denise Mhlanga
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