/ 20 January 2011

‘Perfect storm’ for prospective buyers

According to the oobarameter price index, the average purchase price of first-time buyers fell 4% in December, to R573 112 from R596 841 a year earlier, and the average deposit as a percentage of purchase price also revealed an easing in lending criteria, down 19,1% in December to R121 252 (equivalent to 14,8% of the purchase price) from R159 246 a year ago. This is good news for first-time buyers.

The interest-rate cuts, together with South Africa’s major lenders easing their lending criteria, sustained activity in the housing market. In effect, banks required smaller deposits and approval rates increased from 59,6% in the early months of the year to 67,8% at the end of the year. Rhys Dyer, chief operating officer at ooba, said lenders also competed for new customers, which prompted a return to confidence in the property market.

It also appears that banks are continuing to relax their lending criteria. The average initial decline ratio fell significantly, down 4,8% to 45,5% in December last year, from 50,3% a year earlier. In addition, the ratio of applications declined by one lender but approved by another increased.

The effective approval ratio recorded a strong year-on-year increase of 9,7% in December 2010 to 67,8%.

At the same time residential property prices fell for a second consecutive month in December 2010, according to the latest results released by ooba.

The index showed the average purchase price was R819 977 in December last year, down from R870 051 in 2009.

For the year as a whole, though, prices ended the year 5,8% higher. The first six months of the year were strong and three months of double-digit price increases were recorded, but the second half showed a marked slowdown.

All this would suggest the “perfect storm” for prospective buyers, who may be able to secure a mortgage loan with greater ease, find a reasonably priced property and benefit from low interest rates (though this could obviously change and buyers would need to assess whether or not to fix interest rates upon purchase).

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