First-Time Homebuyers Continue the Residential Property Market


During the third and fourth quarters of 2020 (Q3 20 and Q4 20), South Africa’s COVID-19 lockdown status moved from Alert Level 3 through to Level 1 and then back to Level 3, as South Africa witnessed its highest recorded infection rates in December 2020. After almost a year of the pandemic, ooba has observed changes in both consumer behaviour and lending trends, resulting in a surprising boom in the local residential property market.

Rhys Dyer, CEO of ooba, predicts that the residential property market in 2021 will continue to show strong levels of activity, mostly driven by first-time homebuyers as a result of the low interest rates. Evidence of the strong activity can be seen in the volume of ooba’s home loan applications for Q4 20, which increased by 36% compared to Q4 19, with a 56% growth in the value of the applications received. Applications from first-time buyers in Q4 20 were up by 36% compared to Q4 19, with a 59% increase in the value growth. The value of ooba’s bond instructions to attorneys in Q4 20 was 56% up on Q4 19.  

 Says Dyer: “The current low interest rate environment, as well as competitive home loan deals from the banks, creates an ideal buying environment for first-time homebuyers. Banks in Q4 20 were prepared to provide 100% home loans to a large percentage of first time home buyer applicants. 100% bond applications from first-time homebuyers in Q4 20 increased by 39% year-on-year with 80% of these buyers successfully obtaining finance.

“This means individuals who currently rent property can in a large percentage of cases purchase their first property at a lower monthly cost than their current rental payment,” adds Dyer.

Dyer believes that bank lending is key to continued property activity. The appetite for banks to lend, especially at high LTV’s, will drive the demand side of the market, especially for first-time homebuyers. However, ongoing COVID-19 interruptions to certain business sectors mean banks will be watching the economic drivers closely.

READ MORE: Property Market Recovers to Pre-lockdown Levels of Activity

 ooba’s statistics show that during the fourth quarter of 2020, the Average Bond Size increased by 13.7% while the Average Deposit as a Percentage of the Purchase Price fell by 15.6%. Likewise, the Average Bond for first-time homebuyers grew by 15.5% while the Average Deposit was down by 16.3%. On-going support from banks to continue to lend with no or very low deposit requirements continue to sustain robust property market activity.

 Says Dyer: “The bulk of residential property activity will be at price points that first-time homebuyers can afford. We expect strong interest in properties priced between R500 000 and R2million. However, this growth in demand will likely result in some stock shortages during the year, which will drive up the prices of second-hand properties in this segment. We anticipate an increase in new property developments to augment the inventory, making additional affordable homes available to buy.

 “On the other hand, activity in the luxury and high-end property market is expected to remain subdued. Slow economic growth coupled with low confidence in the economy, is encouraging wealthier South Africans to limit their exposure to the local property market,” adds Dyer.

 With no immediate end in sight to the pandemic, buyers are prioritising their quality of life and new ways of working when purchasing a home. More space, a bigger garden and a home office are in demand. This may mean larger properties slightly further from the CBD may gain more appeal.

READ MORE: Property Hotspots in SA | The Cities & Suburbs in Demand in 2021 

The fourth quarter statistics from ooba show that the Average Purchase Price increased by 11.7% year-on-year reaching R1 349 337. The Average Purchase Price for first-time buyers fared even better, with a 13.7% increase, breaching the million-rand mark at R1 089 443. This annual price growth has been driven by improved affordability due to the lower borrowing costs, coupled with the demand for larger, more expensive freehold properties. The current constrained supply of properties for sale resulting from the heightened property market activity in the latter half of 2020 is also placing upward pressure on property prices in the lower price segment of the market.

 While cheaper borrowing costs will enable buyers to purchase the home of their dreams, the current economic factors at play increase the complexity of applying for a home loan. It is therefore essential for buyers to use a home loan comparison service such as ooba, who can offer sound advice and approach all the banks to secure the most competitive home loan. 

 “Our statistics show that the successful bond approval rate if you only apply for finance to a single bank is 59.7%, down 9.3% year-on-year. During Q4 2020, just over 80% of ooba’s home loan applicants successfully secured bond approvals at an average interest rate of 0.02% below prime, underscoring the value of our home loan comparison services,” concludes Dyer. 

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