FIRST National Bank (FNB) says its estate agent survey results have shown a noticeable increase in first-time home buying.
The percentage of first-time buyers climbed to 22% in the first quarter of this year, from 17% in the preceding quarter. This percentage compared favourably with the percentages recorded around late-2006, although the absolute volume would still be significantly lower than then because the overall market volumes were considerably lower these days compared to then, FNB property strategist John Loos said.
He said the percentage of first-time buying was arguably a good confidence barometer, because first-time buyers generally had more flexibility regarding the timing of their entry into the home-buying market.
“The first-time buyer percentage is also perhaps a barometer of banks’ confidence levels. Banks, too, normally respond gradually to an improved economic and interest rate environment, and the impression a person gets is one of gradual relaxation of lending criteria as time goes by. This is a crucial factor for first-time buyers, because of low savings rates and a high dependence on credit,” Loos said.
He said the improved interest rate and credit environment, and the resultant emergence of a more significant group of first-time buyers, had led to some reversal of the “ageing buyer” trend seen in recent years, where the “market share” of buyers from older age groups rose in prominence.
Loos cautioned, though, that while only time would tell as to when interest rate hikes would start and by how much they would rise, some scenario planning with regard to interest rates would be prudent, buying a home at a price where the buyer could absorb a series of interest rate increases.
“The second caution is with regard to discretionary remuneration on which many people rely. Signs of monetary policy tightening in certain other parts of the world, along with the possibility of interest rate hiking locally, as well as higher commodity prices as of late, raises the risk of slowing global and domestic economic growth, which in turn can affect many companies’ profitability levels,” he said.
The third caution related to municipal rates and tariffs. – I-Net Bridge