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Over the past week, we conducted a survey amongst people who are considering buying their first home. As the survey was conducted via our website www.skerah.com, our target audience was limited to tech savvy participants between 30 to 55 years old.
A total of 111 participants completed the survey and we believe this was a fair representation of our target audience. We think that, even with a higher number of participants, the survey results would not have been much different from our current results.
So let’s take a look at the results:
- What is your current living arrangement?
58% of those that completed the survey are currently renting while 27% are staying with relatives. Only 8% are living in their own homes. Given these results, owning a home still seems to be a difficult task to achieve as those who were not renting were living with relatives. Helping our relatives or living in an extended family arrangement isn’t new in Papua New Guinea, although most would prefer to have their own homes. Most likely, some people live with relatives as they have nowhere else to go and cannot afford to pay rent.
- Have you started saving towards buying a home?
63% answered “YES” which is pleasing while 37%, unfortunately, have yet to start.
- What % of your income are you able to save towards buying a home?
19% said they save between 1-5% of their income. A pleasing 28% said they save between 5%-10%. 14% said they save between 10%-20% of their income while 12% are able to save 20% or more. The 20% or more group is most likely in a higher income category. Most concerning is that 27% said they didn’t know how much they save, which could also be an indication that they don’t save at all. This is a significant concern and one must ask why over a quarter of the participants do not save. The next question provides possible answers.
- What do you find difficult about saving towards a home?
24% said their pay is not enough to allocate a portion to save for a home. 8% reasoned that there were too many household expenses while 4% said customary obligations hindered them from saving. Unsurprisingly, 58% said high living costs prevented them from saving for a home. 6% mentioned “other” reasons.
- What is your perception of current property prices?
5% responded that the prices were reasonable and they just don’t earn enough. While that might come as a surprise to many, there are certain developments taking place where the prices range from K250,000-K350,000, which isn’t too bad. There was no surprise when 53% responded that prices were high, while 40% stated prices as being “exorbitant”. Generally, the responses concluded that prices are still too high.
- What is your experience in approaching a bank for a home loan?
10% stated the banks were helpful either because they succeeded with their application or understood the banks’ responses even if unsuccessful. 14% said the banks were unhelpful and lacking customer service. 10% suggested that the process was too long while a whopping 59% said the banks have too many requirements. Banks usually have a plethora of requirements but this could also be a case of customers not understanding the banks requirements or not properly preparing to apply for a bank loan.
- What requirements for a bank loan have prevented you from meeting home loan requirements?
54% mentioned the equity contribution as preventing them from meeting the bank’s loan requirements. 16% said the interest rate was too high, while 17% said repayments were too high. Presently, banks are asking for about a 20-25% equity contribution. The only exception is the BSP scheme which asks for a 10% equity contribution. You can find more details on the BSP Scheme here.
- How long do you think you will work until you are in a position to buy a home?
41% are optimistic is that they will buy a home in the next 5-10 years. 35% say in the next 10-20 years while a disheartening 22% say in 20 years or longer.
- Does your employer assist you with rent or obtaining a home loan?
63% answered “NO” while 37% answered “YES.” It’s likely that the 37% receive some sort of housing allowance from their employer and are probably professionals in the high income category.
- On completion of employment, will you retire back to your village?
42% were optimistic that they will have purchased their home upon retiring whilst 34% indicated they would return back to their village because they didn’t think they would have a home in the city. The troubling statistic is that 22% do not know what they will do when they retire.
The responses reconfirm that house prices are too high and that citizens are struggling to save. It doesn’t help when the cost of living is growing at a rapid rate.
The results also indicate that there may be a lack of financial understanding on the part of potential homeowners. They may not have the required level of financial education to help them make informed decisions on working towards buying a home or at the very least saving.
In the next few weeks, we hope to bring you some handy information and tips about overcoming some of the issues that have arisen through this survey.