Black home buyers on the rise

27 October 2011

The number of black home buyers entering the South African residential property market is increasing steadily as the socio-economic tables turn, with the number of black home loan applicants already exceeding white applicants.

This is according to Saul Geffen, CEO of bond originator ooba, who says that the number of applications by black buyers currently represent 45 percent of total home loan applications. The number of applications submitted by white home buyers represents only 41 percent of the total number of home loan applications.

Black buyers, however, only represent 39 percent of the number of the total approved home loans, while whites represent 47 percent of the total number of approved home loans. This ratio has changed considerably since last year, when blacks only represented 30 percent and whites 56 percent of approved home loans.

First-time buyers

When it comes to first-time homebuyers, the trend is clearly skewed in favour of black applicants. Currently, first-time homebuyers represent 49 percent of the total number of applications and 44 percent in approved loans. Of these first-time applications, 59 percent of the total is for black applicants compared to 27 percent for white applicants.

When it comes to approved home loans, 55 percent of the total number of first-time homebuyer approved loans is for black applicants compared to 31 percent for whites. This ratio has also changed considerably since last year, when black applicants only represented 48 percent and white applicants 36 percent of approved home loans.

Changing economic demographics in SA

Geffen says that the higher levels and sustained increases in black buyers can be attributed to the changing economic demographic in SA, as well as the fact that purchasing levels are currently higher at the lower to middle income levels and for first-time buyers. Clearly, the improved property market conditions play a role, which has resulted in increased affordability.

“The shifting economic base in South Africa, largely influenced by the emerging black middle class, means the racial demographic of homebuyers is changing.”

The latest statistics also reveal that applications by Asian and coloured applicants remained steady year-on-year at around eight percent and five percent respectively.

“The growth in first-time applications from black applicants can be attributed to improved property market conditions, a reduction in interest rates of 650 basis points since 2008, coupled with subdued property price inflation, improved bank approval rates and lower deposit requirements.”

Boosting your chances of bond approval

He says that first-time home buyers looking to take advantage of the favourable market should ensure that they have a sufficient deposit to put down as it will result in a more favourable interest rate, which significantly reduces the total cost over the term of the loan.

“A meaningful deposit significantly improves a buyer’s chance of getting a home loan approved.”

Other factors that contribute to boosting the chances of a successful bond application include having a positive credit profile and a stable employment history as it reflects a pattern of consistent income which is key when lenders assess a bond applicant’s risk profile.

Geffen says that it is strongly advisable that buyers are pre-qualified when looking for a new home.

“This will give the buyer a good sense as to the value of the property that he is able to purchase. The pre-qualification process can also pick up issues on credit records that will need to be addressed before formally applying to a bank. The process not only streamlines the home buying process, but also ensures that the buyer is able to negotiate from a position of strength.”

Sapa