First-time buyers should wait
2008/02/28
The decision not to increase the prime interest rate above 14,5% in the wake of the past seven successive rate hikes recently, has given homeowners some relief.
But, first-time buyers are still struggling to enter the market due to high interest rates coupled with the National Credit Act's tougher restrictions which effectively disqualifies them from raising high enough bond finance.
Top real estate agents say figures show the average age of the first time buyer is increasing and the proportion of buyers that are first-timers is decreasing.
"To qualify for a R600k loan – which covers the average cost of a home today - borrowers need to earn in the region of R24k per month," says Brent Townes of Lew Geffen Sotheby's International Realty.
"First-time buyers seem to need to wait longer before they reach this income bracket to qualify for a loan on the type of property they want.
"Affordability does affect this segment of the market more than others, so the buying pool has undoubtedly declined. However, the total demand for homes still outweighs the supply," he says.
He predicts that the tables will turn towards the end of this year.
"The successive interest rate hikes were implemented to control inflation. If inflation stabilises as a result of these hikes, we may see interest rate cuts in the last quarter of 2008.
"Provided that property prices remain stagnant until the end of the year - a clear possibility in the current economic climate – it might at last become the ideal opportunity for first time buyers to enter the market."
He says increased housing and property investment contributes to a more stable economy and says first time would-be homeowners and consumer organisations should do more to lobby government for tax breaks and incentives for first time buyers.
"It is wonderful that there is such a willingness by the Department of Finance to engage with consumers via the 'Tips for Trevor' initiative annually before the Budget.
"First-time home buying must again be regarded in the same way as the generations of old saw it - a first step in building wealth and financial stability," says Townes.
Townes lists Queensburgh in Durban, new apartments in Port Elizabeth, Parklands and Parow in the Western Cape as areas offering excellent opportunities for first-time buyers. |
