Deteriorating consumer confidence sees residential property slowdown

 

Property price growth slows as economy waivers

28 April 2017: South Africa’s largest bond originator, ooba, has released its property statistics for the first quarter of 2017 (Q1 2017). The slower growth rate in purchase prices is evident with quarter 1 year on year purchase price growth registering a nominal positive growth of 3.9%.  These statistics show a marked slowdown from the previous Q1 year on year growth of 6.2% (Q1 2015 vs Q1 2016). With the inflation rate at 6.1%, this reflects a negative real purchase price growth for the quarter of 2.2%. . 

Although the year-on-year purchase price for first-time buyers (FTB’s) has also slowed, a year on year increase of 5.5% for Q1 2017 signifies the comparative ongoing demand for entry-level properties. However, the fact that FTB’s are more sensitive to economic downturns clearly reflects in the ooba statistics. In Q1 2017, 46% of all applications processed by ooba were from FTB’s, which is significantly down from 53% in Q1 2016. 

The home loan statistics paint a similar picture says Dyer:

  • ooba’s average bond size is up 3.9% year on year, however when compared to the 8.8% Q1 year on year increase that was recorded in Q1 last year, it is indicative of the reducing growth trend;
  • Bank average decline rates are up 2.8% year on year;
  • The percentage of deals that are declined by one bank but then approved by other banks is down to 30.9% from 33.4% a year ago.  Whilst this trend is down, it does still highlight the critical importance of shopping around for a home loan in this market; 
  • ooba’s resulting Approval rate is down from 73% in Q1 2016 to 71.6% now, driven primarily by increased affordability declines in respect of aspirant homebuyers whose personal income statements are under more strain.
  • The average interest rate in Q1 2017 reflects 0.35% above prime, which is the same as it was in Q1 2016.  This is a positive trend, driven by strong competition amongst home loan lenders for new business.

“The impact of the  recent ratings downgrades is likely to put more pressure on consumers  and that will likely translate into reduced demand for residential property over the medium to long term, says Dyer“.  “Our expectation in a post downgrade environment is a movement, over time, to higher inflation, which in turn will drive higher interest rates, impacting consumer affordability and reducing housing demand, which in turn will keep house price growth constrained.  Additionally banks cost of funding is likely to increase over time, which will lead to higher home loan interest rates being charged by lenders and again have an impact on affordability and property demand.” 

 “With more challenging times likely to lie ahead in the property market, access to home finance for buyers will become even more important.  ooba’s ability to submit applications and negotiate with multiple banks on a buyers behalf, to ensure the highest approval rate in the market will continue to be a critical service to home buyers,” concludes Dyer. 

Full oobarometer analysis: 

Indicator

Quarter 1 2017

(Jan – Mar 2017)

Quarter 1 2016

(Jan – Mar 2016)

Change year-on-year

(Quarter 1 2017 vs Quarter 1 2016)

Quarter 4

(Oct – Dec 2016)

Change quarter-on-quarter

(Quarter 1 2017 to Quarter 4 2016)

Averge Purchase Price

1,167,242

1,122,963

3.9%

1,161,332

0.5%

Average Approved
Bond Size

967,481

930,951

3.9%

959,759

0.8%

Average Deposit
(as % of purchase price)

17.1%

(199,761)

17.1%

(192,012)

0.0%

17.4%

(201,573)

-1.7%

Average Purchase Price of  First-Time Buyer

907,693

860,531

5.5%

888,468

2.2%

Average Approved
Bond Size of
First-Time Buyer

780,167

741,339

5.2%

754,566

3.4%

Average Deposit of First-Time Buyer

(as % of purchase price)

14.0%

(127,526)

13.9%

(119,192)

0.7%

15.1%

(133,902)

-7.3%

Average age
of applicant

38

37

1 Year Older

38

No Change

Average initial decline ratio
(first bank decline)

46.2%

44.9%

1.3%

46.9%

-0.7%

Ratio of applications declined by one lender
but approved by another

30.9%

33.4%

-2.5%

31.8%

-0.9%

Successful Approval Rate

53.8%

55.1%

-1.3%

53.1%

0.7%

Trailing Effective Approval Ratio

71.6%

73.0%

-1.4%

72.7%

-1.1%

Average Weighted Rate of Concession

0.35%

0.34%

0.01%

0.38%

-0.03%

 
 
Note to the Editor:

ooba has been tracking trends in the property market on a monthly basis since June 2008. Some of the indicators used include the average purchase price and unique indicators such as the average approved bond size, the average deposit as a percentage of the purchase price, the average age of buyers, the bank decline rate, the effective approval rate and first-time home-buyer trends. Its aim is not only to show the nature of conditions in the property market over time, but also to reflect the behavioural trends of home buyers and lenders.

oobarometer monthly statistics are available on www.ooba.co.za

 

Infographic_oobarometer_May16

Hello ooba news

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