Property statistics from bond originator ooba for the first quarter of 2016 point to a slowing growth rate in house prices. Compared to the first quarter of 2015, the average purchase price increased by 6.2%, while the first-time buyers’ purchase price is up by 5.3% year-on-year.
Rhys Dyer, CEO of ooba, says “growth below the current inflation rate of 7% means property prices are experiencing negative growth in real terms. Slowing house price growth is forecast for the remainder of 2016 as a result of ongoing weak economic fundamentals”.
The average approved bond size is higher year-on-year, up 8.8% in Q1 of 2016, it found. Concurrently, the average deposit as a percentage of purchase price is 14.6% lower than Q1 of 2015 and 11.5% lower compared to Q4 of 2015. The trend to smaller deposits is amplified in the average deposit of first-time buyers, down 24% year-on-year in Q1 of 2016.
While smaller deposits were recorded in Q1 2016, more home buyers are putting down deposits as a result of the increased cost of borrowing. Q1 of 2016 statistics indicate that 57% of home buyers were able to raise a deposit, compared to 50% in Q1 of 2015. “Buyers who put down a deposit stand a better chance of securing a home loan, as they are seen to be investing their own equity in the property,” says Dyer
According to ooba’s statistics, the volume of home loan applications received is starting to weaken, with March 2016 showing a year on year reduction in application volumes. Dyer believes this signals diminished buyer confidence in the light of the economic conditions and rising interest rates.
The successful approval rate for home loans is down by 2.7% year-on-year for Q1 of 2016, and drifting 0.8% lower against Q4 of 2015. “These are the early signs of the financial pressure facing South Africans due to deteriorating economic conditions, rising interest rates and higher inflation rates. Less buyers are qualifying for finance as affordability constraints kick in,” says Dyer.
ooba’s home loan approval rate of 73% in Q1 2016, indicates that the company continues to secure approval for more than seven out of 10 home loans that it processes. “With one of the highest approval rates in the market, all prospective home buyers, and particularly first-time buyers, are encouraged to use ooba’s bond origination service to successfully secure a home loan during the current difficult economic conditions. ooba also offers a free prequalification service to smooth the way for buyers to find the best bond on the right terms, which allows our customers to concentrate on finding their dream home, while we find the money,” he says.