Deteriorating consumer confidence sees residential property slowdown

 

ooba’s fourth quarter 2016 results shows housing market constrained by consumer budgets

07 February 2017: 2017 looks to be a challenging year for the South African property market, as quarterly statistics released by ooba, South Africa’s largest bond originator, point to ongoing affordability constraints for South African consumers. 

Rhys Dyer, ooba’s CEO says: “With the 2017 Budget Speech just around the corner, South Africa is battling to restore economic growth rates and to balance the books. Against this backdrop, many economists forecast increased personal taxes and increased taxes on consumer goods to be announced in the 2017 Budget to help plug the fiscal gap. This will put further spending pressure on consumers, especially those who are looking to buy property this year.”

The ooba statistics show that from the fourth quarter of 2015 (Q4) to Q4 of 2016 the Average Purchase Price indicated positive nominal growth of 7.1%. However, nominal quarter-on-quarter growth from Q3 to Q4 of 2016 confirms that growth in the property market has slowed significantly 

A year-on-year increase of 8.3% for Q4 in the First-time Homebuyer’s Average Purchase Price indicates the ongoing demand for lower-priced entry-level properties. 

Says Dyer: “Home Loan lenders have adopted a slightly more cautious lending approach, which is evidenced in the Average Deposit as a Percentage of Purchase Price, which showed a 5.5% increase year-on-year for Q4.

“Quarter-on-quarter, the average deposit of First-time Homebuyers increased by 18%, illustrating the challenges aspiring property buyers have in entering into the property market,” adds Dyer. 

Consumer affordability pressure is illustrated by the lower bond approval rates, down 2.7% year-on-year from the fourth quarter of 2015.  Dyer says that lower approval rates are an indication that fewer people are qualifying in terms of affordability for their property of choice.    Average interest rates increased by 10 basis points year on year from 0.28% above prime in Q4 2015 to 0.38% above prime in Q4 2016 - this despite the fact that homebuyers put down greater deposits.  This reflects the increased cost of credit for banks and further impacts affordability for homebuyers. 

“Bond originators provide an essential service to any homebuyer looking for a home loan at an affordable rate. We believe our offering is even more relevant in the current recessive economic environment. Dyer believes that it is vital that buyers are equipped with the right tools and information before they start looking for a home, to avoid disappointment.  Knowing what you can afford upfront, makes the home searching process much less stressful, which is why ooba is launching a free, online, self-service Bond Indicator tool in March to address the need for buyers to have a higher level of financial certainty.  

Despite the more challenging times in the property market, we continue to have one of the highest approval rates in the market and consistently secure bond approvals for over seven out of ten applications we process,” concludes Dyer. 

Full oobarometer analysis:

Indicator

Quarter 4
(Oct - Dec 2016)

Quarter 4
(Oct - Dec 2015)

Change year-on-year
(Quarter 4 2016 vs
 Quarter 4 2015)

Average Purchase Price

1,161,332

1,084,311

7.1%

Average Approved Bond Size

82.6%

(R959,759)

83.5%

(R905,661)

6.0%

Average Deposit (as % of purchase price)

17.4%

(201,573)

16.5%

(178,650)

5.5%

Average Purchase Price of  First-time buyer

R888,468

R820,447

8.3%

Average Approved Bond Size of First-time Buyer

84.9%

754,566

87.2%

715,632

5.4%

Average Deposit of First -time Buyer (as % of purchase price)

15.1%

(R133,902)

12.8%

(R104,815)

18.0%

Average age of applicant

38

38

No Change

Additional Successful Bond Approval Rate by Multiple Banks

31.0%

32.7%

-1.7%

Successful Bond Approval Rate by One Bank

53.1%

55.8%

-2.7%

Total ooba Approval Rate

72.4%

73.8%

-1.4%

Average Interest Rate

0.38%

0.28%

0.10%

 

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

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.