Growth in the real estate market is now in danger of stagnating without an interest rate decrease or other deliberate intervention.
That’s the word from Rudi Botha, Chairman of BetterBond, and SA’s biggest mortgage originator, who says that although overall market activity has increased over the past 12 months, expansion has been limited because the number of new entrants has been dropping steadily.
“Our statistics show clearly that most of the current demand for both properties and new mortgage finance is being generated by existing homeowners who have, for one reason or another, decided to move or to acquire additional properties – and that something needs to be done to stimulate first-time buying and bring more ‘new blood’ into the market.”
The BetterBond statistics, which represent 25% of all bonds registered in the Deeds Office and cover home loan applications made to all of the country’s major banks, show that in the 12 months of end-May, home loan applications by first-time buyers accounted for 37,5% of the total number of applications, compared to 40,3% in the previous 12 months.
“And the declining trend has speeded up in recent months, with first-time buyer applications accounting for only 33% of the total in the past three months compared to 34,5% in the previous three months.”
The most likely reasons for this decline, Botha says, are also to be found in the BetterBond figures, which show that:
- The average first-time buyer house price increased from R598 000 in April 2012 to R685 000 in April this year – a year-on-year jump of 14,5%;
- The percentage of full or 100% home loans being granted by the banks fell from 38,5% of applications in April 2012 to 34,9% in April this year;
- The average percentage of the home purchase price that first-time buyers are required to pay as a deposit rose from 10,7% in April 2012 to 14,3% in April this year.
“These factors have clearly lowered the affordability of home ownership for first-time buyers, and when one adds the rising costs of household essentials such as food, transport and utilities into the equation, it is really not surprising that their numbers are dropping.”
“Essentially, they need to be able to save a substantial deposit, and in order to do that they need to be able to lower their household debt levels. But given the fact that wage increases are currently just about keeping up with inflation that is unlikely to happen unless interest rates are now dropped even further.”
“Such a move would also stimulate economic growth and help to create new jobs, which would of course also be a positive move with regard to expanding the property market.”
This week’s article was contributed by John L. Bradfield, and originally appeared on his blog “This ‘n That”. John is a Real Estate professional with 20 years’ experience in this industry. He is based in Hermanus, the whale-watching capital of the world.
If you own a home or are thinking of buying one, home owner’s insurance is a necessary evil and can even save your investment one day. But there are many different types of policies out there that can be confusing to the average home owner.
Below, are seven different kinds of home owner’s insurance to help you make sense of it all.
The liability coverage of the home owning insurance world is the basic. This type of policy covers only the basics but includes items such as fire, wind-storms, theft, and even volcanic eruption.
This insurance policy covers everything in the above, plus a few more. It adds on coverage for issues such as snow, plumbing damage, and even damage caused by faulty electrical wiring.
More common than the above, special policies allow the home owner to choose the kind of coverage they want. For example, someone on the West Coast isn’t terribly interested in hurricane coverage, while someone on the East isn’t too concerned with earthquake damage.
4. No replacement
Those who have older homes that just aren’t built that way any more can be subject to this type of insurance. While it can cover all the perils of other home owner’s insurance, it pays for the cost of your home minus whatever depreciation it has incurred instead of having it rebuilt the way it was.
If you own a condominium in a complex, it doesn’t make sense to have the outside of your home insured. However, everything on the inside is still subject to damage right down to the appliances. This kind of policy covers personal property and can also be tailored to fit the needs of the individual.
Somewhere between the traditional home and condo is the town-house. While owners of town-houses also need to insure the outside of their homes, insurance needs are different because town-house owners are also usually part of a complex.
Even if you don’t own a home, insurance is still an important option to consider. For example, someone renting an apartment that gets flooded will have their landlord footing the bill for damage to the unit. However, the renter will not be covered for any furniture, electronics and other items that may have been damaged in the flood unless they have renter’s insurance that covers it.
For more information or an obligation-free quote, get in touch with BetterSure.