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, according to bond originator ooba.
Communicating this yesterday, ooba CEO Saul Geffen said the number of applications by black buyers currently represent 45% of total home loan applications. However, the number of applications submitted by white home buyers represents only 41% of the total number of home loan applications.
Black buyers, however, only represent 39% of the number of the total approved home loans, while whites represent 47% of the total number of approved home loans. This ratio has changed considerably since last year, where blacks only represented 30% and whites 56% of approved home loans.
When it comes to first time homebuyers, the trend is clearly skewed in favour of black applicants, according to ooba. Currently, first-time homebuyers represent 49% of the total number of applications, and 44% in approved loans. Of these first time applications, 59% of the total number are for black applicants, compared to 27% for white applicants.
When it comes to approved home loans, 55% of the total number of first-time homebuyer approved loans are for black applicants compared to 31% for whites. This ratio has also changed considerably since last year, where black applicants only represented 48% and white applicants 36% of approved home loans.
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 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,” said Geffen.
He said first-time home buyers looking to take advantage of the favourable market should ensure that they have 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.”