First-time buyers remain a formidable driver of the residential property market’s remarkable recovery, with the average purchase price of a first-time home sitting at around R1 million for several months now.
This applies to buyers of younger than 30 years as well, suggesting that the lower-interest rates have made property more accessible, suggests BetterBond.
READ: When is South Africa's interest rate likely to increase?
Add to this, the annual house price inflation was sitting at 4.6% at the end of April 2021, another positive month-to-month increase, according to the latest Lightstone data, as the industry continues to see a positive impact of the favourable interest rates across all segments.
“After months of steady growth, the average purchase price of a first-time home buyer hit the R1 million mark in October last year,” says Carl Coetzee, CEO of BetterBond. “Considering that this was shortly after the easing of lockdown restrictions, the sustained upward price trajectory suggests that lower interest rates have certainly been a motivating factor.”
READ: Bond applications up 40% | Affordability shrinks time homes spend on the market to 8 weeks
"The impact of the lower interest rates is evident in the 31 to 40 years age group, where one would expect most of the first-time buyers.
"The average purchase price for these buyers is about R1.3 million, up 13.4% over the past 12 months. While BetterBond’s applications show that the average age of a first-time buyer is about 36 years, it is encouraging to see that the average purchase price for home buyers in the 20-30 years age group has risen by almost 20%, says Coetzee. These buyers are also generally buying homes of about R1.1 million.
Western Cape leads in First-time buyer purchase price
The Western Cape has the highest average purchase price for first-time buyers, at just over R1.4 million. Other areas where first-time buyers are looking at properties with price tags of more than R1 million include Greater Pretoria, Johannesburg North West, KwaZulu-Natal, Northern Cape, Nelspruit and Mpumalanga.
Lightstone data show that SA's key metros are seeing closer to the national average inflation rate, with the Western Cape sitting at 3.9%, KZN at 4.7% and Gauteng at 4.1%.
Coastal regions are also outperforming inland, with the below table tracking the long-term view of the data.
READ: Top Western Cape suburbs where you can snap up properties in the R2m to R4m price range
"Then other buyers want to move to more affluent suburbs which are closer to work and have better schools, for example, South Eastern Suburb homeowners from areas such as Mitchells Plain relocating to Southern Suburbs areas like Plumstead, Ottery and Diep River, and upgrading from area to area in Northern Suburbs.
He says another group of buyers are looking for larger homes or two-bedroom apartments to allow more space to work from home, while another segment comprises larger family groups who are buying properties of a larger erf size which allow for multi-dwelling properties such as a granny flat or apartment for adult children or an elderly parent.
Strong demand for well-priced homes
Against the background of a residential property market that is still a buyer’s market, most purchasers are still looking for good deals. The low-interest rates have certainly increased the buyer pool, but there remains a strong demand for well-priced homes
“While some areas in Cape Town are experiencing more downward pressure on price, our experience is that homes below R1.5 million in the South-Eastern Suburbs are moving quickly, and similarly, properties below R2.5 million in some areas in the Northern, Southern and Western Seaboard Suburbs are sought after with well-priced homes selling rapidly, says Janeke.
“Encouragingly, the continued high demand from buyers in general is reflected in sustained positive movement in the market and, apart from the higher demand for homes in specific areas, we are also aware of a few different groups of home buyers most active at present.
“In 2021 to date we have doubled our monthly average unit sales while our turnover has increased threefold since 2018. Our median time to sell is just 21.5 days, while our average price realisation in 2021 is 96.6% of the listing price, which represents on average only a 3.3% discount compared to the industry’s 9% below asking price.
“The market is definitely competitive for well-priced properties, and we are achieving full asking prices and even seeing competing buyers pushing up prices in some instances, such as a Lotus River home which sold for the full asking price of R1.9 million in one day, a Rocklands home with an asking price of R795 000 which sold in three days for R802 950, and other properties in Bloubergrise, Protea Village and Kuils River which sold in just a few days for full asking prices of R1.75 million, R1.42 million and R1.95 million respectively.”
“The overall volume of first-home bond applicants may have dropped slightly, according to BetterBond’s numbers for May, year-to-date, but their spending power has strengthened. This is going a long way to boosting the residential property market,” says Coetzee. “With the repo rate likely to remain below 4% for a while yet, the knock-on effect of lower interest rates and increased spending by particularly first-home buyers will be substantial,” says Coetzee.
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