Here are a list of challenges and opportunities for first-time home buyers in SA

by Staff Bona

Contrary to the growing belief among estate agents that young South Africans lack the financial means to enter the property market, data from Standard Bank reveals a contrasting reality.

According to Business Tech, mortgage acquisitions by buyers under 35 years old have mostly declined since 2010. This excludes a brief uptick in 2020/21 during record-low interest rates amid the pandemic, according to FNB’s latest Estate Agents Survey.
The survey highlights a rise in real estate agents who perceive that incomes have not matched the pace of house price increases.

Since the beginning of the interest rate hiking cycle in the second half of 2021, the proportion of agents reporting incomes significantly lagging behind house prices has surged from 24.5% to 39% as of the first half of 2024.

This demonstrates the growing disparity between people’s salaries and what’s needed to pay for housing. There’s been a notable shift in how first-time buyers finance down payments.

Many previously relied on 100%+ loan-to-value (LTV) mortgages for properties without large down payments, but stricter lending standards now make these loans harder to obtain.

The survey shows a drop in reliance on 100%+ LTV mortgages among first-time buyers, decreasing from 72% in 2021 to 66.5% in 2024.

Amid the country’s cost-of-living crisis, there’s been a decline in reliance on personal savings for significant down payments. Many first-time buyers turn to unsecured bank loans and government subsidies.

The survey revealed a rise in reliance on unsecured loans, increasing from 2% in the second half of 2021 to 11.5% in 2024. There is an eagerness among first-time buyers to face higher risks when entering the market.

The survey also indicates a doubling in government subsidies, rising from 3.5% in the second half of 2021 to 6% in 2024, aligning with the uptick in interest rates.

Decreased affordability affects housing demand, property values and construction, impacting job creation and economic growth. Signs of stabilisation in buying activity are seen with easing price pressures and potential interest rate cuts ahead.

Standard Bank has observed a resurgence in first-time homebuyer activity. Nearly half of all home loans registered in May were taken by first-time buyers.

First-time buyer applications saw an increase in April and May, rebounding after a significant decline in late 2023 and early 2024.

Head of Standard Bank Home Services, Toni Anderson said,

“It is encouraging to see a growing proportion of first-time buyers in our book. As the leading lender for first-time homebuyers, we have maintained a steady risk appetite to ensure ongoing support for aspirant homeowners,” said Toni.

Standard Bank’s findings on first-time homebuyers show that they constituted 48% of bond registrations in the last five years, with approvals averaging 50% annually.

The average loan approved over three years was R975 000, and 40% managed a 24% deposit. The top provinces for activity include Gauteng, Western Cape, and KwaZulu-Natal.

Compiled by Jared Moorgas

First published by Cape Town etc

Also see: All about the government subsidy for first time home buyers