Prices benefit from relaxed lending

In a report released this week bond originator ooba said that the average purchase price processed by the company increased by 12,2% compared to a year ago with the average house price now R872 083.

This represents the third double-digit growth percentage recorded this year. The average purchase price for the first five months of 2010 has increased 10,5% over the same period in 2009. According to ooba, this is being driven by banks who are now approving larger bond sizes and requiring smaller deposits.

The report showed that the average approved bond size increased 17,8% year-on-year in May 2010 to R716 862 compared with R608 337 a year earlier. The average deposit size was also significantly lower, down 18% year-on-year to R155 221 or 17,8% of the average purchase price.

First-time buyer forks out R604&nbsp000
The average purchase price of first-time buyers also showed positive year-on-year growth of 9,1% to R604 857, from R554 303 a year earlier. This brings the average purchase price of first-time buyers for the first five months of 2010 up 10,6% over the same period in 2009.

Buy-to-let still weak
According to Saul Geffen, CEO of ooba, the buy-to-let and holiday home statistics are still down year-on-year. Only 6,3% of application intake in May 10 was for these purposes, compared to 9,4% in May 09, as investors and holiday-home buyers remain cautious.

People still want 100% loans
The bank decline ratio showed a year-on-year increase of 3,4% to 52,9%. According to ooba, the phenomenon of the year-on-year increase is predominantly a function of the increased volume of 100% bonds against which banks are still applying stricter criteria.

The banks were not allowing 100% loans a year ago, and 100% bonds now represent a significant portion of bond applications. Although the decline rates appear similar, they have in fact improved, but the mix of applications has changed considerably.

“The combination of a consistent upward trend in year-on-year property purchase prices, improved affordability, and increased access to credit through lower deposit requirements and higher approval rates all point to positive market conditions for the remainder of 2010,” says Geffen.

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