Open secrets: How you can actually afford to buy your own home

First-time buyers have a few options to help them afford their own homes. Picture: Mart Production/Pexels

First-time buyers have a few options to help them afford their own homes. Picture: Mart Production/Pexels

Published Nov 7, 2023


First-time homebuyers in greater Pretoria, Johannesburg, the Western Cape, and KwaZulu-Natal are leading the pack when it comes to taking their first steps on the property ladder.

While this is a trend usually common in regions that are home to the country’s largest metros, the fact that so many first-time buyers are successfully becoming homeowners in the current economic climate is impressive.

First-time buyers in these provinces and areas account for 80 percent of all BetterBond’s first-time home loan applications in the past year, with Johannesburg North West and South East actually making up 42 percent of all successful applications.

Overall, first-time buyers have retained a share of more than 60 percent of the bond originator’s home loan applications over the past 12 months, says Bradd Bendall, head of sales at BetterBond.

Source: BetterBond Property Brief October 2023

Although fewer young people are buying homes than a decade ago, more buyers under the age of 35 are investing in property as single owners, and many are spending their money on sectional title properties.

“Affordability may have been eroded through increased home loan repayments in recent months, on the back of rising interest rates, but there has been positive growth in job creation in the formal sector...Along with indications that we could see a relaxation of the monetary policy by the SA Reserve Bank, this could result in renewed activity from first-time buyers over the next few months.”

Ways for first-time buyers to invest in property

While these numbers are encouraging, there is no doubt that there are many more South Africans who dream of buying their own homes but simply cannot afford it – or, perhaps, think they cannot.

Bendall therefore shares some methods that aspiring homeowners can use to achieve this dream:

1. A helping hand

First-time buyers with a gross monthly household income of between R3,501 and R22,000 could qualify for the government’s ‘Help Me Buy a Home’ programme (formerly FLISP). Lightstone data shows more young buyers opting for properties as single owners. In 2012, 69 percent of younger buyers were single owners while, in June 2023, this figure increased to just under 75 percent.

“Buying property is a big investment and it comes with additional costs. However, there are still ways for young buyers to invest in property, even if they may not have the financial resources to save a 10 percent deposit, or cannot afford transfer duty on a property.”

2. Clever price – and property, scouring

Buying a home below the transfer duty threshold of R1,1 million will mean a considerable saving for a first-time buyer, he explains. Lightstone reports that 44 percent of sales to buyers under the age of 35 were in the R500,000 to R1m price range.

Another option is to buy in a new development where transfer duty does not apply. The big banks in South Africa offer a range of home loan products that include loans of as much as 110 percent for young professionals under the age of 30.

“A loan of 100 percent or more makes it possible to buy a home without a deposit, and it could also cover transfer and bond registration fees, which brings home buying into reach for this important buyer segment.”

3. Stronger together

Collective saving schemes like stokvels have become an increasingly popular way to buy property, and some of the big banks have even launched a collective buying home loan scheme which allows up to 12 people to buy property together. Each person contributes towards the monthly repayments.

“All applicants remain jointly and severally liable for the home loan repayments, so be clear about financial responsibilities before joining a property investment stokvel – but it can be a very empowering way of purchasing property,” Bendall says.

4. Smaller partnership

You don’t have to put a ring on it to own property with your partner. Joint bond ownership allows at least two parties – perhaps a partner, friend, or family member, to apply for a bond together. While there are many benefits – including shared costs and other responsibilities – it is important to be aware of the risks as well. If one of the bond holders pulls out, the other party will be responsible for repaying the bond.

“The income and credit scores of all parties applying for the home loan will be considered and reviewed. While banks favour joint bonds as it means less risk, it is still important for all those involved to have a good credit record. As with any collective agreement, it's advisable to set out the conditions and expectations in writing so that there are no nasty surprises if circumstances change.”

Where there is a will, there is a way

Whether you are a first-time buyer looking to get a foot on the property ladder or a seasoned investor who wants to expand your portfolio, buying property is an exciting investment.

Bendall states that working with a bond originator who can negotiate with more than one bank on your behalf is an “excellent place” to start your home buying journey.

“This service is completely free to homebuyers, and you can be pre-approved for a home loan online at a time that is convenient for you. By understanding the various financial options available, and with a little help from the experts, it is definitely still possible for first-timers to buy a home of their own.”

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