Residential News

Things appeared to get tougher for first time home buyers last year

According to the fourth quarterly First National Bank (FNB) estate agent surveys through 2016, on average things appeared to get tougher for first time home buyers last year.

This group of entry level home buyers is arguably more sensitive to economic events and interest rate hiking, having not yet built up substantial financial reserves, and often heavily dependent on credit in order to make purchases.

And so, the estimated level of first time buying is typically more cyclical than that of repeat home buyers, growing faster than repeat buying levels in good financial times, and weakening faster in tougher times.

2016 was another year of economic growth deterioration, while also having higher average interest rates than 2015 after two rate hikes totaling 75 basis points in the first quarter of last year.

Not surprisingly, therefore, the FNB sample of estate agents surveyed through 2016 estimated first time buyers to make up 20% of total buying, which represents the second year of decline in this percentage from a 26.5% high in 2014 and 24.25% in 2015.

Viewing the survey annual average by major region, it is noticeable that Cape Town returns by far the lowest estimated first time buyer percentage of 13%.

By comparison, the major Gauteng regions of greater Joburg and Tshwane return far higher estimates of 22% and 24% respectively.

However, land-constrained City of Cape Town has experienced significantly faster house price growth than the rest of the major regions in recent years, and has a strong net inward migration of repeat home buyers from other regions too. It is possible that affordability challenges in that region are “crowding out” first time buyers to a greater extent than in Gauteng, a key challenge for Cape Town should it wish to retain its younger skills base within that region.


Examining the percentage of home buyers that buy as “couples” versus those who buy as “singles” is also a good way of looking for mounting household financial constraints. Couples can very often pool two incomes, and thus in many cases have more buying power than a single-status buyer. A decline in the estimated percentage of home buyers that are single-status buyers thus points to tougher financial times, either due to interest rate hiking or due to a weak economy and lack of new job creation.

Indeed, in 2016 the FNB sample of estate agents surveyed pointed to a further slight decline in the estimated percentage of single-status home buyers, from 19.5% in 2014 and 17.5% in 2015, to 16.7% in 2016.


The softening in the first time home buyer segment contributes further to the rising average age of individual property buyers.

From 40.92 years in 2007, the average age of individual property buyers has risen to 44.4 years by 2016, a further increase on the 43.82 years in 2015.

However, this longer term trend of average age increase cannot only be attributed to the slowdown in first time buyers in the past two years or so. A very significant factor here is a strong growth rate in age cohorts in their 50s and 60s who have reached a stage where they wish to downscale due to “life stage”. These ageing home owners now form a very significant part of the home repeat buyer market as they downscale.

Since FNB started the “Reasons for Selling” part of the FNB estate agent survey in 2008, the estimated percentage of sellers selling for the reason of “downscaling due to life stage” has risen steadily from 13% of total sellers in 2008 to 27% by 2016, 2016 experiencing a further rise from 26% in 2017.

Selling to downscale due to life stage refers most often to home owners whose children have left home, or they are merely becoming too old to maintain a larger home, and so the decide to downscale to a smaller or cheaper home. These people are typically in the older echelons of the home owner market, and have now become a strong driver of repeat home buyer demand as they downscale.

And so, since 2007, the percentage of individual property buyers below the age of 40, the age cohort from which many first time buyers come, has dropped from 52.59% of total buyers to 42.24% by 2016. The 2016 estimate represented a further decline on the 44.22% for 2015.