Entry Level Buyers Hit Brick Wall - 02-19-09

February 19 - Property agents dealing in areas that are not considered particularly affluent are reporting a feeling of disillusionment and frustration as banks continuously turn down home loan applications.

Despite the fact that there is a considerable demand for housing in these areas, especially among the RDP sector - where homes cost between R45,000 and R90,000 - and despite that fact that agents are able to make a good turnaround in sales each month, the problem begins when buyers turn to banks to finance these deals.

Agents are reporting time and time again that over 80% of all home applications are turned down in these areas, leaving them with very little success in their field.

Banks, it seem, prefer to finance home loans applied for by those who are able to put down deposits that make up a substantial portion of the property's value. For that reason, buyers who are able to come up with 40 or even 50% of the value as a deposit stand a much better chance of getting their applications approved.

Unfortunately, the majority of those entry level buyers don't have the sort of cash to put upfront, even when the value of the house is lower compared to other, more affluent areas.

Property agents slam the banks for their indifference to the plight of those willing to commit to purchasing their own homes in the lower socio-economic sectors, yet cannot because of having their applications turned down.

Agents argue that RDP buyers could actually be the perfect clients for the average bank. In many cases, these buyers are government workers with a small but steady salary, eager to improve their lot in life and would, for all intents and purposes, upgrade their homes with a view to selling them and moving onto something grander in the long run.