It has become more affordable to enter the property market

It has become more affordable to enter the property market

The prices may have gone up of purchasing a home but the costs behind the process have decreased. The average percentage of the purchase price required by the banks as a deposit on first-time purchases has shrunk from 8.4% to 6.8%. This is a large decreases and translates into an average saving of R9000.

The transfer duty threshold was raised earlier this year from R600 000 to R750 000, which translates into further savings for most first-time buyers of up to R4 500. And don’t forget that, wages have generally risen faster than house prices over the past two years, so monthly home loan instalments as a percentage of income have grown smaller.

When taking all these factors together it becomes apparent that even in the long-term it has become more affordable to enter the property market for first-time buying despite the sluggish economy and the rising cost of living.

First-time buyers are more credit dependent than repeat buys and it can be a bit daunting if the Reserve Bank goes ahead with further interest rate increases this year, as monthly mortgage repayments start to rise, but take all the factors into consideration before opting out. 

But for moment the demand for residential property continues to grow across all sectors of the market, as reflected in 2.1% increase in the overall number of home loan applications in the last 12 months, with the average of a year-on-year increase of 2% in the total number of home loan approvals, and a 15.7% drop in the number of applications that were declined outright.

It is important to look at the process as a whole and to consider each aspect before making your decision.

Property 24 - Shaun Rademeyer, CEO of BetterLife Home Loans