More first time home buyers show confidence in market - FNB

There were more first time home buyers in the first quarter of 2011, indicating improved confidence in the property market, FNB Home Loans strategist John Loos said on Wednesday.

"The increase in first time buyer demand relative to the overall market demand is a good confidence indicator due to the greater degree of flexibility that an average first time buyer has in terms of timing his/her entry into the market," Loos said in a statement.

He said this reflected "improved new buyer confidence in lagged response to a dramatically improved interest rate environment since 2008".

It also showed improving confidence by the banks offering home loans.

First time buyers made up 22 percent of total buyers in the first quarter of the year, compared to 17 percent in the previous quarter.

"This percentage now compares favourably with the percentages recorded around late-2006, although the absolute volume would still be significantly lower than then because the overall market volumes are considerably lower these days compared to then," Loos said.

The "ageing buyer" trend seen in recent years was being reversed as a result of the improved interest rate and credit environment, and the resultant emergence of a more significant group of first time buyers.

Loos said using Deeds Office data on individuals' transactions, it was estimated that in the four quarters up to and including the first quarter of 2011, 15.3 percent of total buyers were aged 30 and below.

This was up from 14.7 percent in the fourth quarter of 2010, and even higher than the low point of 11.4 percent in the third quarter of 2009.

Loos said the most noticeable increase in market share was among the 31 to 40 years age group -- making up 28.1 percent of total buying in the first quarter of 2011.

This was up from 21.8 percent for the four quarters up to the third quarter of 2009.

The 41-50 year age increased its share of total buying from a 17.7 percent low as at the third quarter of 2008 to 21.7 percent as at the first quarter of 2011.

The 50-plus age group had seen its share drop from 48.8 percent as at the second quarter of 2009 to 35 percent as at the first quarter of 2011.

Loos warned potential first-time home buyers to be aware that inflation could rise, leading to increasing interest rates, so they had to be sure that they could absorb any increases.

"... Three percentage points [from prime rate of nine percent to a rate of 12 percent] would mean that on a bond amount of, say R700,000 at prime rate, the monthly instalment would increase by about R1410 per month."

He also reminded buyers to take into account above inflation increases in municipal rates and tariffs "which have become a far more significant property-related cost in recent years".