New entrants into home market

Posted On Monday, 26 July 2004 02:00 Published by
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Young South Africans are entering the housing market in far greater numbers than ever before.
By Property Editor

Young South Africans are entering the housing market in far greater numbers than ever before.

MortgageSA, South Africa's largest mortgage origination company, has facilitated over R3 billion worth of property finance for the youth sector over the past year, with the largest bond being R4.7m for a 30-year-old. South African youth are increasingly looking at property as an important investment, and many now have the earning power to enter the market early.

Saul Geffen, MD of MortgageSA, says their report defines the youth market as buyers under the age of 32. He feels mortgage originators have played a big role in helping young people to gain a foothold in the market because these industry players have demystified the buying process through greater education and enabled purchasers through improved access to finance. In addition, lower interest rates and positive economic outlook have played a significant role in more young buyers entering the market.

As a result, more young people are waking up to the long-term value of property investment. "They are now more aware that not only are they able to qualify for a bond, but the banks will bid for their business," he says. "Owning a property is not just a lifestyle choice, but is one of the first steps to long-term wealth creation." He says that MortgageSA's statistics indicate that the national average bond size among purchasers in the youth sector is R325 000 and the average age is 28. The buying patterns identified by the MortgageSA study also show that the country's most affluent young purchasers are to be found in the north of Gauteng, the average bond there being R437 000.

Centurion, the Southern Cape suburbs and Pretoria are next in line, with bonds averaging between R360 000 and R400 000. While the highest bond applications, in value terms, come from the affluent northern suburbs of Gauteng and the southern suburbs of Cape Town, the youth of KwaZulu-Natal, across all ages, take out a relatively large number of bonds. Geffen comments that young people in coastal regions seem keen to get a foot in the property door, although the properties they purchase are usually lower in value than those in areas such as Gauteng. Interesting trends emerge within the study on splitting the statistics between those buyers in the 22 to 28 and 29 to 32 year age band (A person must be 21 or older to have a property registered in their name). Property buyers are getting younger.

The MortgageSA statistics show that while the average value of bonds taken out is evenly spread across the two age bands, buyers in the 22 to 28 age bands are buying a higher number of properties. This indicates an eagerness by the younger buyer to enter the market, albeit for lower-priced properties. While the figures for the youth sector are still relatively small in relation to South Africa's total home loan industry, which reached the R100bn mark last year, Geffen believes that these figures indicate an important emerging trend in the property industry that could lead to considerable growth in this sector.

This article was originally published on page 5 of The Cape Argus on July 11, 2004

Publisher: The Argus
Source: The Argus

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