The average deposit as a percentage of the home’s purchase price for Q2 2018 is currently at 14% – this is down 21.8% compared to a year ago! For first-time buyers, however, the average deposit is 12.3% of the home’s purchase price – down by 9.6% year-on-year.
This is according to statistics by bond originator, ooba, whose CEO said banks were enabling more first-time buyers to access the property market by reducing deposit requirements and increasingly approving 100% bonds.
“[This is] evidenced by a 3% increase year-on-year of 100% bond approvals,” said Rhys Dyer, CEO of ooba. “Bond applications through ooba for this market segment also increased by 3% year-on-year, showing a steady return of first-time buyers to the market.”
Increasingly competitive interest rates from banks are also making home loans more affordable, with ooba statistics showing average bank interest rates 15 basis points (1.5%).
“Although we are technically experiencing a buyers’ market, improved access to home loan finance will increase the pool of potential property buyers,” he said. “This is also positive for sellers struggling to sell their properties.”
While all statistics point to a positive home buying and selling environment, consumer sentiment is being dampened by ongoing political issues, including uncertainty around the land reform without compensation issue.
According to Absa’s Q2 Homeowner Sentiment Index, 50% of respondents were negative about property investment and ownership due to these issues alone.
“Despite a cut in lending rates in late March this year, existing and prospective homeowners’ financial positions are adversely affected by factors such as higher taxes and sharply rising fuel prices, with the aspect of land reform impacting property market sentiment over a wide front,” the report’s author and Absa Home Loans analyst, Jacques du Toit wrote. “These factors are expected to contribute to relatively subdued residential property market sentiment in the second half of the year compared to the corresponding period last year, which will be reflected in levels of market activity, buying patterns, transaction volumes, property price growth and the demand for and growth in mortgage finance.”
Ooba has already seen the effect of negative sentiment, reporting a drop in home loan application volumes compared to a year ago.