First-Time Home Buyers Dominate Residential Market Amidst Favourable Lending Conditions

    Seeff comments on first-time buyer interest dominating the residential property despite interest rate spikes due to favourable lending conditions.

    Recent research extracted from popular mortgage originator Ooba stated that over 50% of all home loan applications came from first-time home buyers. Seeff Property Group Chairman Samuel Seeff believes the conducive mortgage lending climate and low-interest rate propelled this trend; however, while interest rates increased to 125 BPS (Basis Points) in 2022, they remain well below the pre-pandemic level. 

    Data from Deeds Office

    Data compiled from the Deeds Office indicates that there is still significant buyer interest in the under-35 age bracket; more than one-third of all purchase activity in 2021 occurred in big cities and metro areas. 

    These areas include;

    • Soweto (27%)
    • Cape Town (32%)
    • Bloemfontein (35%)
    • East Rand (56%)
    • Gqeberha (30%)
    • Durban (31%)
    • Johannesburg (33%)
    • Pretoria (34%)

    According to Seeff, since the 2005 National Credit Act was enacted, the residential property market has made the most out of the best mortgage lending conditions. A prime example of this is the past decade's accelerated approval rate of home loans. Deposit requirements also decreased to approximately six to seven per cent as commercial banks continue to fight for a "piece of the pie" in the home loan market.  

    Benefits for First-time Home Buyers

    First-time buyers currently benefit from 100% total bonds, which cover many process costs. Seeff notes that buyers continue to capitalise on this significant benefit.

    Data compiled from the Deeds Office indicated that activity in the lower price bands continues to blossom, with 80% of the transactions falling under R1.5 million. A recent Lightstone report shows that sales falling between the R700 000 to R1.5 million price bracket reached a six-year high in 2021. 

    In the lower price brackets, national house price inflation also stagnated at around 4.55% (5% to 6%). Seeff states that this slow-down in house price expansion only contributes to the conducive market buying conditions.

    Market Remains Stable Despite House Price Increases

    The South African house price increase was meagre compared to other countries post-pandemic, and the decrease in the global interest rate over the past two years has not helped the situation. However, the property market appears stable. 

    STANLIB Chief Economist Kevin Lings stated that South Africa's housing market remains undervalued, yet still provides outstanding value for potential buyers and sellers.

    A presentation to the Seeff National Convention by Kevin Lings (STANLIB's chief economist) mentioned that South Africa's housing market is undervalued to a large degree yet provides outstanding value. 

    Lings elaborates that the property market did not succumb to oversaturation despite the colossal peak in sales activity.

    Higher Home Loan Repayments Will Affect Buyers

    Buyers must prepare for higher loan repayments, given the anticipated growth of 100 BPS in the latter half of 2022; however, Seeff confirms that the interest rate will continue to favour buyers.

    The residential market also recovered from the pandemic-induced decline that occurred in 2020. Despite a slow-down after a massive buyer frenzy from mid-2020 to mid-2021, the market continues to trade at pre-pandemic levels.

    Seeff states that the property market reaped big rewards from the Covid-19 pandemic due to significant interest rate cuts. The drop caused a considerable boost, enabling first-time home buyers to purchase their first homes.

    Seeff has enjoyed two full years of profitability, and the group could close 2022 with another record year. Seeff's consensus is that the latter half of 2022 remains favourable and well-balanced, with a steady supply of new stock. In light of this, buyers can take advantage of fortuitous home loan conditions and excellent property value.

    Buyers celebrating their new home

    At Seeff, home is our story, and we want to help you take that daunting first step towards buying your first home. If you enjoyed this article, you might consider reading our article about tips when selling a house for the first time.

    Author: Seeff Property Group
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