Consumer Information

Authors: Various
1 July 2021

Two things shaping the ‘perfect seller’s market’ midway into 2021

The biggest driver of South Africa’s healthy residential property market is undoubtedly the current low-low interest rate. Quite simply, it brings the cost of financing a home within reach for many first-timers and young people who wouldn’t otherwise be able to afford a bond.

But in fact, according to Leadhome Properties CEO, Marcel du Toit, there are two historic lows in play right now.

The first is the prime lending rate, and the second is the number of buyer viewings completed per accepted offer to purchase.

“Our data shows that the number of buyer viewing appointments that need to be completed for every offer accepted is currently sitting at 15.3 viewings; compared to 20.6 viewings in August 2020 and an average of 20 in 2019. We are at a historic low!” says du Toit.

This means that property sellers are benefitting from the wealth of interested parties looking to snap up a home, and are able to complete transactions quickly and with minimal inconvenience, he adds.

‘More likely to sell it fast’

“In simple terms, if you’re thinking of putting your property on the market, you’re more likely than ever to sell it fast – especially, but not exclusively, in the R700,000 to R1.5 million bracket.”

As we observed Youth Month, Bond originator, Bondspark also notes that younger home buyers are coming to the table more prepared for the application process than previously.

South African youth are becoming more educated in financial matters and more empowered with information, which in turn generally leads to better decision-making.

Kyle Rigney, Bond adviser at Bondspark says, “It’s safe to say that most young people entering the property market have done their homework with regards to their needs and income versus affordability. While there is still a need for more education amongst younger buyers, this demographic is more likely than before to have been pre-vetted for a bond, which also contributes to the speed at which a property transaction can be concluded.”

“And it seems that the banks are also coming to the table: In 2020, banks were lending above prime to 70% of bond applicants. However, in the first quarter of 2021 there was an increase, to just over 40%, in the number of bonds being granted at below prime rates. There has also been a marked increase in the number of bonds being granted over 25 and 30-year periods, rather than the traditional 20-year period, with these stats showing that younger buyers are benefitting the most.

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.

“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.”

“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.

“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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