Home loan lending conditions remain favourable

Statistics for the third quarter released by ooba, South Africa’s largest bond originator, indicate continued growth in property prices but at a slower rate than the previous few quarters. Despite the slowing growth in property prices, home loan lending conditions remain favourable.

Rhys Dyer, CEO of ooba says, “Demand for residential property still outstrips supply, which bodes well for continued growth in house prices albeit at a milder pace, given the challenging local economic conditions coupled with subdued consumer confidence in a rising interest rate environment.”

The quarterly oobarometer shows a year on year growth of 5.7% in the average house price in the third quarter of 2015. The average house purchase price reached a high of R1,022,519 in Q3 of 2015, compared to R967,108 in Q3 2014. This is off the back of an 11.0% year-on-year growth in the second quarter of 2015.

“Whilst we are starting to see a slowing in the rate of house price growth, the home loan lending statistics in Q3 2015 continue to show favourable conditions for home buyers. This is illustrated by Q3 2015’s lower average deposit, higher approval rates and more competitive rate concessions,” says Dyer.  
Dyer notes, however, that there are signs that home buyers are facing constraints in accessing deposits which is evident by the increased demand in Q3 2015 for 100% bonds.

“Of all applications received in Q3 2015, 52% were from home buyers who had no access to a deposit, compared to 49% in Q3 2014 and Q2 2015.This resulted in the average deposit reducing from 14.5% of the purchase price in Q3 of 2014 to 12.1% in Q3 of 2015. Despite the lower average deposits in Q3 of 2015, the average interest rate dropped from 0.55% above prime in Q3 of 2014 to 0.32% above prime in Q3 of 2015, pointing to increased competition amongst lenders for new home loan customers,” he says.

The following additional home buyers’ trends were identified in ooba’s latest quarterly statistics:

A marginal increase in first-time buyer activity has been recorded. Of all applications received in Q3 of 2015, 53% were from first-time buyers compared to 52% in Q2 2015.
Only 10% of applications received in Q3 2015 consisted of self-employed applicants, compared to 11% in Q2 2015 and 9% in Q3 2014.   This is far off the 20% level experienced in 2007, indicating that self-employed applicants are less confident about their ability to qualify for finance.
95% of ooba’s applications received in Q3 2015 were for the purchase of primary residences, which is unchanged from Q2 2015 but is 1% up on Q3 2014.  This indicates a very marginal improvement in activity in the buy-to-let and holiday home market.
An increase in demand for purchasing sectional title properties has been recorded primarily due to house price affordability, lower home maintenance costs and security reasons. Of all applications received in Q3 2015, 32% were from applicants purchasing a sectional title unit compared to 30% in Q3 2014.

“With one of the highest approval rates in the market, ooba continues to prove that using a bond originator gives home buyers a better chance of getting a competitive approval in the shortest possible time at no additional cost.  Our free prequalification service gives buyers the advantage of focusing on finding their dream home while ooba finds the money,” concludes Dyer. 

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