Property Talk

It's time to buy property for first time buyers

First-time homebuyers are currently in the perfect part of the property market cycle to act and secure their initial entry into the property market. The market is characterized by aggressive pricing from sellers and mortgage providers that are actively competing for your business ensuring that competitive rates and terms are provided.

According to SA's leading mortgage originator, Ooba, the approval rate increased by 2,4% to 82.8% in Q4 2019 from 80.4% in Q4 2018. Over the same period, the average deposit as a percentage of the purchase price fell to 10.9% from 12% in Q4 2018.

Another shift over the past year has been the cost of money as the average interest rate provided by Ooba to its customers was 13 basis points lower year-on-year, with the average currently being 0.01% below prime. Our prime interest rate in South Africa is 9.75%. These favourable buying and lending conditions should encourage first-time buyers to act and commit to a property in their area of choice.

As a first time buyer and within a price point of around R2m there is a very good chance a qualified first time home buyer will obtain 100% mortgage finance on a property. This level of finance is not always available and the opportunity that presents itself should be enthusiastically adopted by first-time buyers.

The cost and availability of finance is the fuel that drives a property market and we can expect the overall performance of the lower level of the market to perform well over the next year.

The top end of the property market will continue to provide excellent value for those willing and able to transact and its performance now depends more on overall confidence and general economic growth rather than the cost and availability of finance.

A strategy recommended to first-time homebuyers to ensure the best possible terms are negotiated when presenting an offer to purchase is to obtain a pre-approval certificate from Ooba home loans.

This is done quickly and efficiently and is very powerful at the time of contracting to alleviate the fears of a seller as it provides an upfront level of certainty as to the ability of the purchaser to perform.

The mortgage condition found in most sale agreements is a very powerful suspensive condition and does, in reality, create that level uncertainty for a seller over the period that the condition is open for, which in most cases is thirty days.

By presenting a pre-approval certificate at the point of submitting an offer, the buyer removes this uncertainty and thereby strengthens his ability to negotiate the price. The mortgage application process for pre-approved clients is also quicker ensuring that a final grant quotation from a bank will be received well within the period provided for.

Investing in real estate remains a fundamental cornerstone of building wealth over time and the earlier you can commence on this journey the wealthier you will be.