Deteriorating consumer confidence sees residential property slowdown

 

Ailing economy creates slower demand for entry-level property 

28 July 2017: Second quarter statistics (Q2 2017) from ooba, South Africa’s leading bond originator, show nominal positive growth year-on-year of 3.6% in the Average House Purchase Price.  Whilst it is encouraging to still see positive nominal growth in the current economic environment, the year on year property price growth remains below the current inflation rate of 5.1%, indicating negative real house price growth over the period.. 

Rhys Dyer, CEO of ooba, says: “Whilst the property market nationally is suffering negative real price growth, there are marked differences in terms of regional growth rates across the country, with many areas in the Western Cape still showing significant real price growth.

“A symptom of SA’s ailing economic growth is the impact on consumer affordability, especially for first time homebuyers looking to enter the residential property market.  The fact that First-time Buyers (FTB) are more sensitive to economic downturns is reflected in ooba’s statistics. First time homebuyer volumes have dropped from 52% of total applications in Q2 2016 to 47% of total applications in Q2 of 2017.  Further, the FTB Average Purchase Price showed insignificant year-on-year growth of 2.9%, while quarter-on-quarter growth from Q1 2017 to Q2 2017 showed negative growth of -0.9%. 

 “The decline in the FTB market is worrying considering that for some time, the growth in the FTB Average Purchase Price outstripped the Total Average Purchase Price, whilst applications from FTB’s consistently made up over half of all applications received by ooba,” adds Dyer.  Looking forward, the recent announcement from the Reserve Bank to drop interest rates by 0.25%, coupled with the decline in inflation rate, should see first time buyers returning to the market, given improved affordability.

On a more positive note, competition from banks for new home loan business remains strong, as evidenced by the higher approval rate in Q2 2017 of 72.7% as compared to Q2 2016, of 72.2%, this coupled with an Average Interest Rate of 0.34% in Q2 2017 compared to 0.47% in Q2 2016, is evidence of banks competing strongly for new home loans business.  

“We are pleased to see some investor confidence creeping back into the property market as 7% of all applications received by ooba in Q2 2017 were from investors, compared to 4.5% in Q2 2016. This appears to be in response to the increased demand for rental properties,” says Dyer. 

 “We believe that our role as a bond originator really comes to the fore during these tougher economic times. Obtaining a home loan in the current economic environment is challenging. We take the pressure of finding the best home loan deal off our buyers, leaving them to concentrate on finding their dream home,” concludes Dyer.  

Full oobarometer analysis: 

Indicator

Quarter 2 2017

(Apr - Jun 2017)

Quarter 2 2016

(Apr - Jun 2016)

Change year-on-year

(Quarter 2 2017 vs Quarter 2 2016)

Quarter 1

(Jan – March 2017)

Change quarter-on-quarter

(Quarter 2 2017 to Quarter 1 2017)

Averge Purchase Price

1,200,044

1,158,517

3.6%

1,167,242

2.8%

Average Approved
Bond Size

985,773

958,887

2.8%

967,481

1.9%

Average Deposit
(as % of purchase price)

17.9%

(214,271)

17.2%

(199,630)

4.1%

17.1%

(199,761)

4.7%

Average Purchase Price of  First-Time Buyer

899,674

874,544

2.9%

907,693

-0.9%

Average Approved
Bond Size of
First-Time Buyer

777,010

745,281

4.3%

780,167

-0.4%

Average Deposit of First-Time Buyer

(as % of purchase price)

13.6%

(122,664)

14.8%

(129,262)

-8.1%

14%

(127,526)

-2.9%

Average age
of applicant

38

39

1 Year Older

38

No Change

Average initial decline ratio
(first bank decline)

44.4%

46.5%

-2.1%

46.1%

-1.7%

Ratio of applications declined by one lender
but approved by another

29.3%

31.1%

-1.8%

31.5%

-2.2%

Successful Approval Rate

55.6%

53.5%

2.1%

53.9%

1.7%

Trailing Effective Approval Ratio

72.7%

72.2%

0.5%

71.9%

0.8%

Average Weighted Rate of Concession

0.34%

0.47%

-0.013%

0.35%

-0.01%

 
 
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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