Positive bank sentiment buoys mediocre property market

Posted On Wednesday, 18 July 2018 14:34 Published by
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Property statistics for the second quarter (Q2 2018) released by ooba, South Africa’s leading home loan originator, indicate that banks remain positive about the home loan lending environment despite continuing negative real growth in average property prices nationally.

 oobarometer-APR-JUN-2018

Rhys Dyer, CEO of ooba, says: “Ongoing economic and affordability constraints, socio-political issues and the uncertainty around the Land Reform Bill are hampering growth in the property market, causing average price growth to drop below the current rate of inflation. Home loan application volumes are also down year on year, however approval rates on these applications are up, illustrating a healthy appetite from banks to lend money.

“Banks appear to be confident that property prices will continue to show steady nominal growth, which is great news for homeowners. Positive lending sentiment and improved access to credit will prop up the current property market and support its recovery,” adds Dyer.

 ooba’s Approval Ratio of 75.8% for Q2 2018  compared to Q2 2017’s 73.1% shows that bank approvals have increased by 2.7% year-on-year.

At the same time banks have relaxed their deposit requirements. The Average Deposit as a percentage of the Purchase Price dropped by 21.8% year-on-year compared to Q2 2017 (down to 14% of purchase price). The Average Deposit for First-Time Buyers as a percentage of the Purchase Price decreased by 9.6% over the same period (down to 12.3% of purchase price).

Dyer says: “Banks are enabling more first-time buyers to access the property market by reducing deposit requirements and increasingly approving 100% bonds, as evidenced by a 3% increase year-on-year of 100% bond approvals. Bond applications through ooba for this market segment also increased by 3% year-on-year, showing a steady return of first-time buyers to the market”.

Increasingly competitive interest rates from banks are also making home loans more affordable. The ooba statistics show average bank interest rates are 15 basis points lower year-on-year. This current low-interest lending environment, coupled with slower growth in property prices is making the purchase of a property a great deal more affordable.

“Although we are technically experiencing a buyers’ market, improved access to home loan finance will increase the pool of potential property buyers. This is also positive for sellers struggling to sell their properties,” adds Dyer.

Prospective home buyers should take advantage of the current positive lending environment to invest in property. By using a bond originator like ooba, home buyers can pre-qualify for home loan finance. The ooba Bond Indicator (OBI) is an online, easy-to-use, self-service assessment tool. It provides potential buyers with a clear view of their credit score and credit profile, as well as a certificate outlining the house price range they can afford.

 “We currently secure an approval rate of almost 90% on applications where home buyers have been pre-qualified using our pre-qualification tools,” concludes Dyer.

Last modified on Wednesday, 18 July 2018 14:57

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