Gauteng shows strongest first-time home buyer rates, due to affordability
First-time home buying remains reasonably solid nationally‚ but a closer look regionally reveals major divergences‚ with Gauteng seeing strong levels and Cape Town at the weakest end of the spectrum.
This is according to John Loos‚ a property sector strategist.
According to the FNB Estate Agent Surveys throughout 2017‚ the estimated average first-time home buyer level was 20.27% of total home buying for the year. Loos said this is at almost the same level as the 20% average for 2016‚ a more-or-less sideways move last year‚ after noticeable declines in the prior two years.
"This ‘stabilisation’ in the first-time buyer rate has much to do with a strong first-time buyer rate in Gauteng‚ reflecting that region’s superior home-affordability levels compared to other major metropolitan regions."
Loos credited the 2017 stabilisation in first-time buying nationally to a gradual turn in the interest rate cycle after hiking from early-2014 to early-2016. "A stable interest rate environment in 2018 could see this percentage moving more-or-less sideways again‚ or even slightly upwards should interest rates decline further."
The economic heartland of SA is where new homeowners are finding value. New homeowners are also younger in Gauteng than other provinces.
Greater Johannesburg saw an increased average first time buyer percentage‚ from 21.6% in 2016 to 25.9% in 2017‚ while the Tshwane region went from 23.75% to 26.7% over the same period‚ said Loos.
"These percentages‚ both strong and above the national average estimate‚ we believe, are due to Gauteng being the most affordable major residential region‚ when affordability is considered as average house price relative to average household income. The province has had low house price growth (often negative in real terms) in recent years‚ enabling it to achieve further affordability improvements. It is this superior home affordability in Gauteng which‚ we believe‚ may make the region the relative ‘outperforming’ housing market in 2018."
In the coastal metros‚ the first-time buyer picture appeared less positive in 2017.
Both Ethekwini (Durban) and Nelson Mandela Bay (Port Elizabeth) saw declines in their average estimated first-time buyer percentages‚ Mandela Bay dropped from 19.6% in 2016 to 17% in 2017‚ and Ethekwini from 20.5% to 14.7%.
However‚ the most severe decline in estimated first-time buying levels took place in the City of Cape Town‚ said Loos‚ where strong house price growth in recent years has resulted in a "significant home affordability deterioration".
Said Loos: "We believe that a sharp decline in its estimated first-time home buying percentage is strongly reflective of this affordability deterioration.
"The region’s annual first-time buying percentage has been below the national average for nine consecutive years‚ but has diverged far more significantly from the national average since 2016‚ after it fell sharply from 18.39% in 2015 to 12.8% in 2016‚ and then further to just 7.5% in 2017."
Estimates by province of the average age of bonded home buyers — using deeds office registration data — appear supportive of the notion of superior Gauteng home affordability.
The estimated average age of a bonded home buyer was 36.95 years in Gauteng‚ the lowest average age of any of the nine provinces‚ with only Mpumalanga coming close to that average.
The three major coastal provinces continued to show significantly higher average ages for bonded home buyers‚ 39.3 years in the case of the Eastern Cape‚ 39.1 years in the Western Cape‚ and 39 years in the case of KwaZulu-Natal.