Housing in Southern Africa July 2016

News

Banks raise home loan deposits The slowing economy has not yet caused a decline in the percentage of home loans applications being approved by banks, but banks have started raising deposit requirements in recent months.

Purchase price R0 to R250 000

Average deposit Maximum%of purchaseprice

-

R17 205 R30 638 R93 371 R222 353

R250 00 to R500 000

12,3% 18,7% 22,2%

R500 00 to R1m R1m to R1,5m

sure and negatively affected housing affordability.” He points out that once house- holders have paid all their monthly bills many people just don’t have enough disposable income left to comfortably afford a bond repay- ment. In these circumstances, the banks have no choice but to restrict the size of loans. What is more, he says, given mounting pressures on the country’s lending institutions to lower their risks and increase their reserves, it is not expected that the trend of increasing deposit requirements will change for some time. “First-time buyers may find it eas- ier to prioritise debt repayments and savings to enable themto buy. Better- Life Home Loans statistics show that

in May the average first-time buyer house price was R724 000, and the average percentage of purchase price required was just R86 000 or 12% of the purchase price. Consequently, says Rademeyer, first-time purchases as a percentage of the total are not expected to fall far from the current 46% level in the coming months. “We do, however, foresee that the average home price may stall and even decline as the higher deposit requirements at the top end of the market cause many repeat buyers not to upgrade but to downsize and opt for smaller and less expensive homes.” The BetterLife Home Loans statis- tics represent 25% of all residential mortgage bonds being registered in the Deeds Office. ■

Shaun Rademeyer

A ccording to Shaun Rademeyer, CEO of BetterLife Home Loans, the country’s largest mortgage originator, banks are applying strict affordability criteria in terms of the National Credit Act, and this has re- sulted inmost buyers requiring a big- ger deposit than they did a year ago. Rademeyer says, “The main rea- son for this change is the steady rise in interest rates since July last year, which has pushed up the monthly repayments on all kinds of debt. This combinedwith rising inflationhas put many household budgets under pres- R awson Property GroupManag- ing Director, Tony Clarke says, “This generation of millenial buyers – currently in its 20s and early 30s – has very different ideas about what makes a perfect home com- pared to previous generations such as Baby Boomers and Generation X buyers.” A major study by global research company Nielsen, in 2014, found that 62% of Millennials would prefer to live in mixed-use, live-work-play communities, in an urban centre where they can walk to work, shops and restaurants. “Indeed, the survey revealed that Millennials are currently already liv- ing in urban areas at a higher rate than any other previous generation. Almost 40%of themare not planning to leave the city and relocate to the

Millennials – the next wave of homebuyers Millennials are the next big group of homebuyers and it’s important that the residential market understands where and how these young people prefer to live.

lives and expect green features such as additional insulation, energy- efficient windows, solar panels and rain tanks.” When it comes to the floorplan, several construction surveys show that Millennial buyers prefer homes with an open layout for entertain- ing and outdoor spaces like patios, decks and balconies to extend their living areas. “And finally, the research shows that they generally prefer neutral colours and clean architec- tural lines that won’t date, lots of light and durable, unfussy finishes,” concludes Clarke. ■

suburbs in the future,” says Clarke. But, while they may not be keen on the suburbs, a large number of Millennials like the idea of living in small country towns – provided everything they need is within walk- ing distance and there is cell phone and internet connectivity. It is not surprising that most of these busy people prefer smaller homes that require less upkeep. “What is interesting is that they generally don’t like cookie-cutter apartments, townhouses, or clusters that all have the same floorplan. Millennials lead technology-driven

July 2016