It’s a great time for first-time buyers (FTBs) to enter the market, and more are taking advantage of the lower interest rates, says Samuel Seeff, chairperson of the Seeff Property Group.

The percentage of first-time buyers (FTBs) in the market has increased to an average of 46% to 48% nationally, driven by the lower interest rate, bank competition for home loans, and a strong desire for home ownership. With the interest rate down by 1.50% over the last 18-months, buyers are saving as much as R1 224 per month on a R1.2m home loan (over 20-years at 10.25% prime), or they can now purchase at a slightly higher value, says Seeff.

The transfer duty exemption at R1.21m remains another incentive for first-time buyers since it significantly lowers the upfront costs. The highest volume of sales for this buyer demographic remains below R1.2m (higher for the Cape due to higher average prices).

Affordability is a clear driver of demand, so the percentage of first-time buyers varies by province and city, depending on average prices. In KZN and the inland provinces, it is for example at 40-50%, the East/South Rand is at 51%, and the North West is the highest at 52%, due to lower price points.

In the bigger metros, Joburg and Tshwane are at 41%, offering great affordability in the R1m to R1.3m range. While the Eastern Cape is at around 47%, it is only 36% for the Western Cape due to higher average prices of R1.5m to R1.8m. While sectional title properties are often their primary choice due to more accessible pricing, first-timers also purchase freehold houses and properties in estates, according to agents. They are also keen investors in the rental market.

The favourable mortgage lending conditions play a key role in boosting first home buying, says Seeff. Most banks still offer full 100% (zero deposit) loans, with some banks offering costs on top of that. Low-income earners who fall below the traditional bank threshold can benefit from the government’s First Home Subsidy programme (FLISP) which applies to those earning between R3,501 and R22,000 per month. The scheme provides a once-off subsidy which can be used as a deposit or to reduce the principal loan amount, and it is applied through the banks.

Seeff says it is always beneficial to buy sooner rather than later. While further rate cuts are expected, buyers should not wait given that there is no certainty on when the next rate cut will follow. Waiting too long could mean you end up paying a higher price as prices are expected to pick up further this year. If you hesitated to buy in Cape Town when the interest rate was low four years ago, you will now likely pay about 27% more for the same property.

Purchasing in a new development also offers benefits for first-time buyers, as these projects typically include VAT in the price, which removes transfer duty entirely, and often includes a package inclusive of bond and transfer attorney fees.

To reduce risk and share costs, prospective buyers could also purchase with a spouse, partner, sibling, or parent, a trend known as “co-buying.” It is, however, important to ensure you tick all the legal boxes, and seek legal guidance when necessary. In certain instances, it may be prudent to enter into a formal agreement which covers each party’s contributions, cost division, and a clear exit plan should one decide to sell their share.

Seeff says investing in property is one of the best ways to build stability and financial security. Buyers must, however, ensure they are familiar with the implications and costs of home ownership, and that they are financially secure. A property is a significant, long-term financial commitment and is considered an “illiquid” asset, meaning you cannot sell it quickly if a financial crisis strikes.

Issued by Gina Meintjes