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A combination of factors, including low interest rates and strong sales activity, means that the average age of a first-time home buyer has dropped dramatically in South Africa, says Berry Everitt, CEO of real estate group Chas Everitt International .
Price growth has been outpaced by wage growth in recent years, which has helped make homeownership more affordable for many working South Africans, Everitt said.
“But it’s the low rates that have really tipped the balance and are driving the large number of first-time buyers right now, as well as much higher-than-expected levels of sales activity among regular buyers.”
The average age of first-time buyers in South Africa has declined rapidly this year, from around 37 before closing in March to around 34 today, he said.
“The sooner you start to earn equity in your property by paying off your mortgage loan, the sooner you will get an asset that you can sell, rent or use as collateral to borrow money to pay for your children’s tertiary education, for example, or invest in more rental properties that will increase your income in retirement. “
Alternatively, Everitt said that buying young products could simply mean that you are “bond free” by the time you turn 40 and have more financial freedom.
“What’s more, putting any excess money in your bond now will not only give you a much better return, tax-free, than you can currently achieve on almost any other investment that is not much riskier.
“This is a habit that can really help anyone pay off their property much earlier than expected and save hundreds of thousands of rand in interest.
“If you have a 1 million rand bond at a 7% interest rate, for example, and you pay an additional 1,000 rand a month, you will reduce the repayment term of the bond by more than four years and save about 208,000 rand of interest. “
Dynamic change
Everitt said that thanks to the growing trend of remote work, young buyers don’t necessarily follow the traditional route of first buying a small apartment close to work and then moving to a larger home as their family grows.
“The rapid adoption this year of technology that makes it possible to work from anywhere that has good cell phone and internet connectivity also means that the first home you buy now could also be your ‘forever’ home, perhaps in a coastal city. or rural that is (for now) much more affordable than one of the large metropolitan areas, ”he said.
Everitt said regular buyers are finding especially good value in the R2.5 million to R5 million price range, where there is still an oversupply and a careful upgrade is likely to represent a good investment.
“Despite the current downward pressure on rents, the outlook for buy-to-rent is also improving, and the demand for rental accommodations of all kinds will grow in the coming years.
“Initially we expect this to happen due to the delayed effects of Covid-19 and the shutdown, but within a few months demand should also start to be driven by large infrastructure projects that are being carried out as part of the recovery plan. government economic.
“This will support rents, and as things stand now, prices are extremely competitive, so investors should not delay,” he said.
Read: The demand for space sees a shift towards this type of home in South Africa
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