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July property prices up

The year-on-year increase in property prices is continuing‚ especially for first-time buyers‚ with a simultaneous decline in the size of the deposit required - all of which are positive indicators for the residential property market‚ says bond originator Ooba.

Data released on Tuesday showed the average purchase price in July this year was R846‚863‚ up 3.1% from R821‚579 in July last year.

The average purchase price for first-time buyers showed a year-on-year increase for the 15th consecutive month‚ rising 7.8% from R609‚417 in July 2011 to R657‚069 in July 2012.

The month-on-month purchase price statistics do‚ however‚ indicate a trend of slowing growth in property prices‚ in line with slowing economic growth.

“Of our total intake of bond applications in July‚ 53% were from first-time buyers‚ a 5% increase from last year‚” said Rhys Dyer‚ chief operating officer of ooba.

“The sustained higher levels of first-time buyer activity are underpinning good year-on-year growth in property prices in the first-time buyer segments.”

Ooba’s statistics have continued to show a reduction in the average home loan deposit‚ down from 15.1% of the purchase price in July last year to 12.6% of the purchase price in July this year‚ and lower than the 15.0% of the purchase price recorded last month.

The reduction in deposits was a good indicator of bank credit appetite‚ reflecting improved access to finance for home buyers with limited deposits‚ Dyer said.

Ooba said a further indicator of easier credit conditions was the effective approval rate - the percentage of loan applications for which it obtained approval - which rose to 65.3% of applications‚ from 64.2% a year ago.

Dyer said the increase in the approval rate was driven by a healthy improvement in the percentage of applications that are declined by one bank but approved by another‚ up from 23.1% of applications last year to 27.6% this year‚ highlighting the importance of shopping around for finance.

These improved lending conditions continued to drive strong year-on-year value growth‚ with ooba reporting a 28% year-on-year increase in the value of its home loan applications and a 38% year-on-year increase in the value of home loan approvals in July‚ the best monthly performance recorded since early 2008.

“The decision by the MPC (the Reserve Bank’s monetary policy committee) to drop interest rates in July by a further 0.5 percentage points is likely to add further mild stimulus to the lending environment‚ improving the ability for home buyers to qualify for loans‚ especially in the active first-time home buyer space‚” Dyer said.

“This‚ coupled with the improvements in approval rates and average deposits‚ is likely to sustain the current higher levels of lending activity.”

(I-Net Bridge)


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