/ 14 April 2011

Increase in bond applications and approvals

Any movement in a property market that’s been flat for some time is going to create a bit of a flurry, so it’s significant that Ooba has just issued a release to say the number of bond applications reached a three-year high last month.

The average number of applications is 36% higher than the average intake recorded last year.

If 36% seems like a jump, it is — but we must also remember that the increase is coming off a low base. We’re not necessarily looking at an imminent revival in the property market.

It’s heartening, though, to know that the level of approved home loan approvals has increased, reaching figures that topped the value of approved home loans in October 2008. Jan Kleynhans, CEO of FNB Home Loans, says that a combination of affordability and access to finance have contributed to this.

Compare the situation to July 2009, towards the end of the so-called Great Recession, when roughly half the applications for home loans from FNB were turned down due to excessive debt and other factors. Post-recession, it’s definitely good news that approvals have increased along with applications. It suggests that South African households might be recovering some of their ability to service debt.

Ooba’s Saul Geffen is bullish, suggesting the growth can only continue, while interest rates remain low. Subdued property prices, low inflation and real wage growth are certainly making life easier for would-be buyers.

Kleynhans agrees that approvals are up and says people are currently relocating or downscaling, which is where the buying action appears to be. “A lot of people seem to be relocating to the Cape as there’s a perception that the city’s better run, which is a factor in people’s decisions,” he says. “Also, people feeling financial pressure are downscaling.”

Geffen says banks have certainly relaxed their lending criteria and this has made a huge difference to the rise in applications and approvals. It’s one of the biggest drivers in the property market, after all.

Reductions in transfer duty on properties will also go some way towards boosting the property market. The new transfer tax laws stipulate that there’s no duty payable on home priced up to R600 000. If a property costs between R600 000 and R1m, you’ll pay 3% on that amount exceeding R600 000.

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