Favourable lending conditions and an oversupply of new builds make this a good time to buy property

Banks are presently granting more home loans and are asking for lower deposits. Also on the positive side, inflation is expected to be relatively benign, with the possibility of one more 25 basis point rate cut by the South African Reserve Bank (SARB) expected later this year.

The lower interest rate favours mortgage holders, so if you are considering buying a new home this is an ideal time to take the plunge.

Banks are more lenient

“Mortgage advances have been progressive in recent months and loan to purchase ratios (LTPs) have been rising. This has helped inject liquidity into the market,” says Siphamandla Mkhwanazi, Senior Economist at FNB. The latest FNB Property Barometer reports that despite the challenging macroeconomic environment, transaction volumes trended up in 2019, in line with the recent upswing in mortgage lending which outpaced house price growth.

According to data from the SARB, mortgage advances grew at a progressively faster pace throughout 2019, reaching 5 % year on year in November – currently the latest data point. In the year to November, the value of mortgage advances increased by 4.8% – the highest growth since 2009.

The LTP ratio increased to 91.2% in the third quarter of 2019, suggesting that lenders are progressively asking for smaller deposits from prospective buyers. A breakdown of the data shows that much of this upsurge was in the middle to upper segments, with lending to the lower end remaining relatively conservative. Anecdotal evidence also suggests that the intensified competition among lenders pushed mortgage interest rates lower.

In the present scenario, buyers are getting discounts on market prices because the market is favouring buyers, with over 95% of sales finalised at prices below initial listing prices. On top of this, lenders are also offering attractive interest rates on mortgages due to increased competition between financial institutions – thereby enabling more buyers to qualify for home loans.

Sectional title supply exceeds demand

According to the latest FNB Property Barometer there is an oversupply of sectional title units countrywide, but especially in Gauteng. This situation is being corrected with fewer flats being built, so the window of opportunity will probably be closing towards the end of 2020.

Stats SA data shows a massive surge in the supply of new residential units in 2019, particularly of sectional title units. In the year to October, the volume of new units was 67% higher than the corresponding period in 2018. Looking ahead, the volume of new residential units in the planning stage has reduced, presumably in reaction to subdued demand. This gives tentative signs that actual supply of new stock will probably decline in the coming months.

There are several advantages to buying a new home in a sectional title development:

• In most cases you will not have to pay transfer duty as you are buying directly from the developer.
• Conveyancing costs are included in the purchase price, so they can be included in the mortgage loan amount.
• Many of the costs incurred for extras, alterations and additions such as an extra bathroom or a different type of flooring can also be included in the amount granted in the housing loan.

Benefits of home ownership

Home ownership provides a range of financial and wealth creation options that renting does not, and the sooner you start to access those, the better your financial future is likely to be.

Benefits include:

• Wealth creation - The value of the property will keep increasing while the amount you owe decreases.
• Customise your home - You can renovate, redecorate, add on and improve the property to meet your requirements.
• Peace of mind – If you buy early enough your home should be paid in full by the time you are ready to retire, providing you with security of tenure. The sale of your property could provide sufficient funds for a small retirement home plus additional income.