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Five years ago *Lwazi had to declare his debt to his employer in order to be assisted to better manage his finances and realise his future goals.
With his R350,000 debt settled a year ago, Lwazi, 34, started saving 10% of his salary every month and used the funds as a deposit for a two-bedroom house in Blairgowrie, Randburg, which he and his family of three moved into in March this year.
“It’s always been my dream to own a house but money was not always available. I also had a bit of debt which I had to disclose to my manager as is required from a bank employee. The company settled my debt and I had to repay them over time.
That helped because I was able to save on interest and started putting some money away. I thought 2024 would be the perfect time because of the property market which looked favourable to buy,” said Lwazi.
Despite high interest rates, first-time homebuyer activity has been resurgent in SA.
In May, nearly 50% of home loans registered by Standard Bank were taken by first-time buyers. This included all approved home loans where at least one applicant was purchasing their first home. The volume of applications from first-time buyers also increased in April and May following a notable decline in the last months of 2023 into 2024.
Standard Bank’s data indicates a recovery in the first-time homebuyers’ market since the first quarter, when the Ooba Home Loans’ oobarometer indicated that the proportion of applications from these buyers had dropped to a low of 46%.
“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. The rise in applications and loans directed towards first-time buyers shows the market’s recognition and appreciation of our commitment,” said the bank’s head of home services, Toni Anderson.
According to Rhys Dyer, CEO of Ooba Group, there has been an 8% increase in application volumes in the first quarter of 2024 compared to the last quarter of 2023 and there is definitely more activity in the market.
He said the uptick in property prices, first-time homebuyer deposit values and buy-to-let investments against steady bank approval rates are all positive trends.
He said the first-time homebuying frenzy in May 2020, when interest rates dropped to 7%, saw this segment accounting for a record 56% of Ooba Home Loans’ applications.
According to Dyer, some prospective homebuyers are postponing their first property purchase until interest rates decrease and inflationary pressures are reduced.
Meanwhile, these buyers are using the delay to accumulate savings to finance a larger portion of their purchase, recognising the long-term financial benefits of making a deposit, said Dyer.
Standard Bank offers home loans of more than 100% of the purchase price to first-time homebuyers that qualify. This is done to help them cover upfront costs like bond registration and transfer fees.
“That’s because at Standard Bank first-time buyers now qualify for up to 108% subject to risk assessments offers. This also shows that first-time buyers need more help to cover upfront costs,” says Anderson.
Tips for first-time home buyers
- Save for a deposit; it gives you leverage to negotiate a lower interest rate.
- Research; look at tenant vacancy rates and payment behaviours in different areas.
- Be astute, notice and make use of financial opportunities.
Once a buyer is ready to purchase, Adrian Goslett, the regional director and CEO of RE/MAX of Southern Africa, recommends getting pre-approval on a home loan before they start the house hunting process.
This shows the seller that the buyer is in a serious position to purchase, which can increase the chances of their offer being accepted, especially if there are other offers on the table.
Involving a property professional can also accelerate the process of finding their dream home as estate agents are often privy to homes before they even hit the market.
*Not his real name
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