Age no obstacle as younger first-home buyers break the R1 million ceiling to invest in property

First-home 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, says BetterBond. This applies to buyers of younger than 30 as well, suggesting that the lower interest rates have made property more accessible. 

“After months of steady growth, the average purchase price of a first-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.”

The average house purchase price of a first-home buyer applying to BetterBond for a bond has increased by 15% for May, year-to-date. “Just two years ago, the average first home buyer was spending under R900 000 on a home. In May 2021, that average had increased significantly to more than R1 095 900,” says Carl Coetzee, CEO of BetterBond.

Five consecutive repo rate cuts last year have resulted in a prime lending rate of 7% - the lowest it has been in 55 years. “First-home buyers particularly are seeing the benefits of the favourable lending environment, as many can now afford to apply for a bond.” The average approved bond size for first-home buyers has also shown positive movement, increasing by 15% in May, year-on-year.

The Western Cape has the highest average purchase price for first-home buyers, at just over R1.4 million. Other areas where first-home 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.

While most of BetterBond's applications - almost 41% - are for properties between R500 million and R1 million, there has been a 11% increase in applications for bonds for homes of up to R1.5 million. The mid-market price segment is also showing signs of strengthening, and there has been a 36% increase in bond applications for homes in the R2.5 million to R3 million range, and a 31% increase for homes of between R2 million and R2.5 million for April year-to-date.

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-home 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-home 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. 

Concludes Coetzee: “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.”

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