House prices up but growth slowing

According to the latest statistics released by BetterBond, SA’s biggest mortgage originator, the national average home price has shown positive growth of 9,3% in the year to end-June, compared with just 3,7% in the previous 12 months.
However the BetterBond statistics, which cover 25% of all residential mortgage bonds being registered in the Deeds Office and include applications to, and bond grants from, all the major lending banks in SA,also show that the average home price increased by just 1% in the June quarter, compared with a 6,6% increase in the first quarter of this year. (See table)
“This clearly illustrates the dampening effect that high cost-of-living increases are having on the real estate market,” says BetterBond chairman Rudi Botha. “In the past three months, the extra funds injected into household budgets by January salary increases and February personal tax cuts have been absorbed by sharp increases in the cost of transport (especially fuel) and utilities (especially electricity).
“As a result, consumers are struggling to make ends meet, and while the demand for property remains high, the decline in disposable incomes is putting a lid on what potential buyers are able to afford – and what banks are prepared to lend them.”
On the other hand, he says, the banks appear to have more confidence in the long-term future of the market than they did a year ago, because the average percentage of purchase price required as a deposit has dropped from 20,9% to 16,3%. “This is also in line with the efforts of most banks now to scale back on unsecured lending such as personal loans and increase secured lending such as home loans, which are a lot less risky.”
“Indeed we have seen the percentage of applications declined by one bank and approved by another jump to 38% in recent months, compared to 28% two years ago.”
In the first-time-buyer sector of the market, the BetterBond statistics show that the average home price rose 7,8% in the year to end-June, compared to a 2,9% increase in the previous 12 months.
However, the average first-time-buyer home price in the June quarter was actually 0,4% below that in the first quarter of the year, following a 2,9% increase in the three months to end-March.
“And here too, the average percentage of purchase price required as a deposit has declined, from 12,1% a year ago to 8,3%,” says Botha. “This means that with price growth having flattened off now, it should be somewhat easier for new buyers to get a foothold in the market.
“Having said that, though, all potential buyers should be prepared for the fact that the banks’ credit granting criteria are still very tough, and realise that they will benefit enormously from working through a reputable mortgage originator such as BetterBond.
“We are now able to get three out of every four bond applications we submit (74,6%) approved, compared with an industry average of about 50%, and in the past two months our clients have been formally granted a record R5,4 billion worth of home loans.”

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