Deteriorating consumer confidence sees residential property slowdown

ooba’s property statistics for May show a marked slowdown in house price growth, with the year-on-year change in the Average Purchase Price showing negative nominal growth.  The Average Purchase Price is down by -0.5% year on year from R1,072,615 to R1,067,703.  This is the first year on year reduction in house prices we have seen since December 2012.

The Average Purchase Price of First-time Buyers is still showing some year on year growth albeit at a slower rate, with a 3% increase year-on-year to R820,155.

Rhys Dyer, CEO of ooba, says: “The slowdown in residential property price growth does reflect slowing demand for property as South Africans are faced with poor economic growth, high inflationary pressures and increasingly expensive credit. A further factor has been a noticeable change in the makeup of properties being bonded with a greater percentage of smaller and medium sized properties in the mix, as compared to the same period last year”

Despite the negative year on year property price growth, the ooba Average Approved Bond Size showed continued strong growth, with a year-on-year uptick of 7.9% from R898,578 to R969,205.  As a result the Average Deposit dropped significantly from a year ago, from 16.2% of the purchase price in May 2015 to 9.2% in May 2016.

Dyer says: “This reduction in deposits as a percentage of the purchase price comes at a time when banks are tightening their scorecards and requesting homebuyers to put down larger deposits, which appears counter-cyclical.  The reason for this, again seems to be in the differing mix of properties currently being bonded, with greater demand for the smaller and medium sized properties, than was the case 12 months ago.  

“Banks’ Average Initial Decline Ratio is up by 4.6% reflecting the more cautious approach that banks are taking in their selection of successful bond applicants. The increase in average interest rate from 0.33% above prime last year to 0.49% this year, is also reflective, not only of the change in the mix of properties being bonded, but also banks becoming more conservative on rate.

In these times, we believe ooba has a vital role to play in helping homebuyers obtain bond finance, given the increasingly cautious stance from banks and the tougher homebuyer affordability environment. We have the expertise to source the best home loan, while our homebuyers focus on finding their dream home,” concludes Dyer.

 

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In 2013, South Africa saw slow but steady recovery in the property market, paving the way for greater growth in the year to come.

 

Properties are languishing on the market as buyers remain cautious - but there are things sellers can do to get the best possible price according to SA's largest mortgage originator. Careen Mckinon, Provincial Sales Manager Western Cape at ooba, said home sellers have to be ultra savvy these days. Here are ooba's top tips to make your home as appealing as possible without breaking the bank.

The latest 'oobarometer' price index, first launched by ooba (formerly MortgageSA) in July this year, showed that average house prices have risen 3.4% in the month of September 2008, year on year.