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Monday Jan 23, 2012

First-time property buyers prop up prices

There has been a significant revival in the first-time home buyers' market.

Mortgage originator ooba reported a 14.5 percent yearon-year increase in the average purchase price among first-time buyers in December compared with 6.2 percent growth for the overall market.

However, the renewed strength of the first-time home buyers' market is not expected to lead to a recovery in the overall market this year, with house prices largely forecast to move sideways.

The latest price index by ooba revealed the average house price rose to R870 564 in December from R819 977 a year earlier, while the growth in the average price among first-time buyers rose to R656 230 from R573 112 in the same period.

Saul Geffen, the chief executive of ooba, said on Friday that growth in the average price of homes purchased by first-time buyers was helped by lower interest rates and an easing in bank lending criteria.

He said 50.1 percent of home loan applications submitted to ooba last year were from first-time home buyers, who accounted for 44 percent of approved loans by volume and 35 percent by value.

Black buyers represented 45 percent of the total number of home loan applications and 35 percent by value received by ooba, with this increasing to 59 percent by volume and 49 percent by value in the firsttime home buyers segment.

Geffen said the increasing number of first-time buyers had fuelled demand for property in this sector. He attributed the growth in home loan applications from this segment to improved property market conditions, a drop in interest rates since 2008, better bank home loan approval rates and lower deposit requirements.

FNB property strategist John Loos said first-time home buyers became far more significant in the market last year after falling to about 15 percent of total home buyers in 2008.

Loos said the percentage of first-time buyers rose from 17 percent in 2010 to 23 percent last year, the highest level since 2005. He attributed the improvement to confidence.

"Many young first-time buyers have the flexibility of remaining in the rental market until such time as economic or interest rate conditions improve or alternatively postponing their departure from their parents' home.

"It should therefore not be too surprising that the recovery in the first-time buying percentage lagged the overall market recovery somewhat, with a portion probably choosing to adopt a 'wait-and-see' approach but now more encouraged as the memory of recession and high interest rates fades," he said.

Loos said demand from first-time buyers helped prop up the overall market at a time when it was flattening out. But he expected demand from firsttime home buyers to flatten out this year and about 2 percent house price growth overall.

Business Report


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