The South African Reserve Bank (SARB) has raised interest rates, which has had a significant impact on first-time homebuyers in particular.
The prime lending rate is now at 11.75% as of May 2023. This increase in interest rates has made it difficult for first-time buyers to afford homes, and many have been forced to “buy down” due to affordability constraints.
The average purchase price of first-time homebuyers has fallen from an average of R1,117,398 in Q3 2021 to R1,087,089 in Q3 20221.
Tips for First-Time Homebuyers
If you are a first-time homebuyer in South Africa, there are several things you can do to prepare for the home buying process.
Here are some tips:
Crunch the numbers
Have a good look at your budget and your disposable income. What could you spend on a property?
Remember that it’s not just the bond repayment. You’ll be paying levies or insurance, rates & taxes, and utilities too.
Make financial adjustments
Be cut-throat with those accounts and expenses. Consolidate debt, close unnecessary accounts, and pay off outstanding bills.
A healthy payment profile will stand you in good stead with the banks if you’re applying for a mortgage bond.
Research areas before settling on a place to buy
Consider renting first to see if you like the area. Look for areas with good schools, low crime rates, and easy access to public transportation.
Consider the 100% Home Loan
For many first-time buyers, gathering the funds for a deposit may be difficult.
Thankfully, many banks are catering to first-time homebuyers by offering the 100% home loan.
As the name suggests, this loan covers the full purchase price of the property.
Get Prequalified
Determine what you can afford by getting prequalified.
This will give you an idea of how much you can borrow and what your monthly repayments will be.
FLISP
The Finance Linked Individual Subsidy Programme (FLISP) is a government subsidy aimed at first-time homebuyers. It increases chances of home loan approval and reduces interest rates.
Property Trends in South Africa
The historically low interest rates of 2020 and 2021 impacted the residential real estate market positively.
However, further interest rate hikes are expected in 2023, which could threaten the real estate market.
The stay-at-home lifestyle of the pandemic era has led to an increase in demand for more spacious homes. The luxury property market was expected to suffer in an unstable economy, but has actually seen an increase in activity.
The current interest rate in South Africa has made it difficult for first-time homebuyers to afford homes, but there are several tips that first-time buyers can follow to prepare for the home buying process.
Additionally, the real estate market has seen some positive trends despite the interest rate hikes. It’s important to stay informed and seek expert guidance when navigating the home buying process.
