At what age should you become a home owner?

As you move from one life phase to another, you may have wondered when is the right time to invest in a home, rather than continuing to rent.

We have a look at the average age of first-time home buyers in South Africa, the factors that influence this age, and when you should consider investing in property.

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Average age of purchasing a home

According to Andrea Tucker, director at MortgageMe, the average age of first-time South African home buyers oscillates between 35 and 40, depending largely on macro-economic factors.  

“When the prime lending rate reduces, as we’ve seen for the last 15 months, the average age drops. Right now, it’s 36. When financial institutions temper their risk appetite and lending criteria with the express purpose of taking on more loans, we see the average age drop too,” says Tucker.

On the other hand, Tucker notes the following factors that have increased the average age of South African first-time home buyers:

• A slow economy. When economic growth is slow, this impacts and limits new job creation and thus increases the age at which young people enter the job market, and therefore the property market. Young workers are more sensitive to economic shocks and interest rate increases. They may not have established any wealth to draw on in times of uncertainty, and this is likely to keep them out of the property market.
• Travel now, invest later. There are those who prioritise experiences and adventure over stability and security. They delay their entry to the property market because they have elected to spend more of their disposable income on travel.
• Deposits and affordability. There are many South Africans who cannot afford to put down a sizable deposit on a property. Prospective home buyers get older while they save for their deposits, and the average age of first-time home buyers increases accordingly.
• House price increases. House prices in some desirable neighbourhoods have increased to the point where a significant portion of the population can no longer afford to buy there.

READ MORE: Is property a good investment?

When should you invest in property?

According to Brendan Michie, director and attorney at Hammond Pole, you should ask yourself when it’s the right time to invest in property, and not just the right age at which to do so.  

“Age isn’t an appropriate measure as purchasing a property comes down to affordability. Purchasing a property is a massive financial decision and most people will only make such a decision once or twice in their lives. The biggest factor on whether to purchase a property is finance,” says Michie.

“Not only do you have to qualify for a loan, but there are several upfront costs, such as transfer costs, bond costs, and transfer duty, which all have to be paid by the buyer upon signing an offer to purchase,” he explains.

Michie says that all of these costs need to be considered before you can make the move from renting to purchasing a property. Most people will save for several years before they have the funds required to pay these upfront costs.

“In addition to these costs, the biggest factor in determining whether you should move from being a tenant to a homeowner is whether you can secure a loan from a financial institution,” says Michie.

He points out that there are two factors to consider here. The first is ensuring you can afford the repayments, and the second is having a suitable credit record to allow you to apply for a mortgage bond to finance the purchase of the property.

“Repaying your creditors and avoiding judgments are two very important factors to take note of to ensure you have a good credit score to qualify for a loan,” says Michie.

“There are also several affordability calculators online that you can use to get an idea of what the repayments would be on the required loan.

"Mortgage origination companies can also assist with pre-approval if you are considering making an offer on a property,” he adds.

He recommends getting legal advice if you’re uncertain about a property purchase decision. 

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