January oobarometer shows 4.8% annual house price decline

January oobarometer shows 4.8% annual house price decline

The January oobarometer price index shows a decrease in the average house price growth by 4.8%.

"The oobarometer shows that the property market is continuing its negative trajectory," says Saul Geffen, chief executive of ooba (formerly MortgageSA).

The average purchase price was at R818, 905 in January 2008 compared to R779, 033 in January of this year.

The oobarometer is expected to continue to record declines in house prices until the second half of 2009. Thereafter the property market is expected to start to make a recovery and begin to show positive growth at the end of 2009 into 2010.

"Interest rates are expected to continue to be cut throughout the first half of 2009 which will give home owners much needed relief and stimulate the property market," says Geffen.

"The stringent changes to lending criteria implemented by banks at the end of last year have had an immediate effect on the average decline ratios," says Geffen.

The year-on-year average decline ratio has increased by 15.3% while the month-on-month data reflects a 0.8% increase. This means that, in January 2009, 58% of all home loans submitted were declined by the first bank their application was submitted to.

The ratio of applications declined by one lender but approved by another also showed a strong downward trend in January of this year to 22% from 38% in January 2008. This means that only 22% of loans declined by one lender were taken up by another in January.

"The sharp decrease in the ratio of applications declined by one lender but approved by another indicates that there is a reduced opportunity to obtain approval once one bank declines an application," states Geffen. "This is due to the restrictive lending criteria the banks have imposed recently."

There has been a 22% increase in the year-on-year average deposit as percentage of purchase price which is indirectly linked to the change in bank lending policies.

The average bond size has drop by 8.4% from R700, 042 in January 2008 to R641, 140 in January 2009. There was a 2.8% drop in month-on-month average bond size.

Geffen notes that banks' recent tightening up of lending has compounded the troubles in the housing market.

"Banks have introduced much stricter lending criteria and fewer buyers are qualifying for the full amount of the loan they apply for. With interest rates coming down, the recovery of the property market is shifting towards bank lending policies. Banks will need to relax lending in order to facilitate increased demand and prevent further price deflation" concludes Geffen.

Full oobarometer analysis:

Indicator

January

2009

January

2008

Change yr on yr (Jan 09 vs Jan 08)

December

2008

Change month on month (Dec 08 to Jan 09)

Avg purchase price

R 779,033

R 818,905

-4.8%

R 851,660

-8.5%

Avg purchase price

of  first time buyer

R 561,948

R 554,843

1.3%

R 576,286

-2.5%

Avg approved bond size

R 641,140

R 700,042

-8.4%

R 659,354

-2.8%

Avg deposit (as % of purchase price)

17.7%

(R 137,893)

14.5%

(R 118,863)

22.0%

22.5%

(R 192,306)

-21.3%

Avg age of applicant

38

37

1 Year Older

38

No change

Avg decline ratio

58.0%

42.7%

15.3% increase

57.2%

0.8% increase

Ratio of applications declined by one lender but approved by another

22.0%

38.4%

-16.4% decrease

27.4%

-5.4% decrease

Hello ooba news

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