Of the total Home Buying percentage in 2017, the FNB Estate Agent Survey reported that 20.27% of the buyers were First-Time Home Buyers – a very slight improvement on 2016 levels – indicating that for the most part the buying category appears to have stabilised. Historically, this buying category deteriorated rapidly following the cyclic interest rate hiking beginning in 2014.
John Loos of FNB stated that this was to be expected of aspirant home buyers, especially those entering the market for the first time, given that they are “far more dependent on credit to enter the home buying market, and thus more sensitive to interest rate changes” in contrast to older, repeat buyers.
The current interest rate climate - seeing a 25 basis point cut mid-2017 and remaining unchanged in November 2017 and January 2018 - provided it remains stable or better yet improves, may result in a further increase in the first-time buyer percentage this year. What is interesting is that despite the fact that the interest rate climate is the same for all provinces, the major metropolitan regions [Gauteng, the Western Cape, Eastern Cape and Kwa-Zulu Natal] reflected varying degrees in performance. According to Loos the difference in performance “appear strongly reflective of major home affordability differences by region.”
Gauteng’s Johannesburg and Tshwane metropolitan regions reflect increases above the national average of 20.27% - Johannesburg’s first-time buyer percentage now sits at 25.9%, whilst Tshwane increased by 3% y-o-y to 26.7%. These estimates are largely to thank for the stability in the first-time buyers category.
The increase in first-time buyers is seen as largely due to the low house price growth recorded in the region over the last few years, improving affordability relative to household income. Proportionally, the City of Cape Town has experienced considerable house price growth in a relatively short amount of time, resulting in a sharp decline in affordability and an estimate of 7.5% of the total buyers as first-time buyers.
The average age of bonded first-time home buyers in Gauteng is another indication of home affordability. In Gauteng, the estimated average age of a bonded home buyer was 36.95 years, compared to +39 years of the Eastern and Western Cape and Kwa-Zulu Natal. Recent improvements in the social, political and economic environment may well bolster the national average of first-time home buyers in 2018.