Bigger bond sizes encouraging for buyers

Good news for home buyers is that the average approved bond size has risen by almost 6% in the past 12 months, while the average home purchase price has risen only 3.3%.

That’s according to the latest statistics from bond originator BetterBond, which show that the average approved bond size in the year to end-October was R893 000, and that the average home price during the same period was R1.1 2million.

Meanwhile in the first-time buyer sector, the average deposit required declined from 12.2% to 11.5% – and the actual cash amount required fell for the first time in many years, from R90 500 to R89 500, notes BetterBond chief executive, Shaun Rademeyer.

“The average home price in this sector has, however, grown faster than the average, showing a 4.68% increase in past 12 months to R775 000. This reflects higher demand in this sector, with our statistics showing that first-time buyers now account for 47.7% of home loan applications, compared to 46.6% in the previous 12 months.”

However, he says, first-time buyers only account currently for 30% of home loan approvals, which indicates the difficulty that buyers in this sector have in obtaining loans and finalising purchases. “It also underlines the advisability of applying for loan pre-qualification through a reputable bond originator before they start looking at homes to buy.

“In addition to providing an accurate idea of their buying power, the pre-qualification procedure also enables buyers to identify any credit and finance problems that might affect their ability to obtain a home loan, and take action to correct these ahead of time.

“Pre-qualification also assists estate agents and home sellers, who are then assured that the buyers they are dealing with are actually capable of financing the homes they are viewing.”

Rademeyer says first-time buyers who want to keep deposit cash requirements to a minimum are focusing on properties priced at less than R900 000, which also attract no transfer duty. “Our statistics show that the average home price paid by buyers aged between 20 and 30 in the year to end-October was R796 000, and that paid by buyers aged 30 to 40 was just over R1m.

“In the same period, the average deposit paid for a home costing between R500 000 and R1m was R79 000, while the average deposit paid for a home priced at R1m to R1.5m was R215 000 – suggesting that most purchases in the lower price category were made by first-time buyers in their 20s and 30s.

“The much higher average deposit in the higher price category speaks of older buyers, who tend to be repeat buyers with proceeds from the sale of an existing home that they can and do use as deposits on their new properties. Our figures show, for example, that the average deposit being paid by buyers aged 40 to 50 is around R278 000, which is 22.4% of the average purchase price for that age group of R1.24m.”