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Lower Property Prices An Opportunity for First Time Buyers

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The slowdown in local residential property price growth is providing first time buyers with an opportunity to get a foot on the property ladder.

While the oobarometer price index, released by ooba, South Africa’s leading bond originator, recorded a negative year-on-year price growth of 3.4% to R 821 579 in July 2011 from R 850 763 in July 2010, the July first-time buyer's purchase price figures show a 3% year-on-year growth to R 609 417.

According to Rhys Dyer, Chief Operating Officer at ooba, the average first time buyer’s purchase price has seen consistent growth in the past quarter, which he attributes to the low interest rates combined with the ongoing easing in lending conditions, especially in regard to deposit requirements. “Higher levels of activity amongst first time buyers are generally a positive indicator for the housing market, as demand increases and there are positive knock-on effects.”  

49.3% of home loan applications finalised by ooba from January to July 2011 are for first time homebuyers.  This is up 2.3% from the same period last year.

The oobarometer also reflected a number of other positive signs for the property market. These included a 0.7% increase in the average approved bond size to R 702 072 in July from R 696 903 a year ago, while the average deposit decreased by 19.9% to R 119 507.  The average deposit is now equivalent to 14.5% of the purchase price. Dyer says that this decrease is a sign of banks’ improved lending appetite.

The average bank decline ratio at 46.6% and the effective approval rate of 64.2% remained at similar levels to the June 2011 numbers, indicating little month on month change in bank approval rates.

He adds that in July, the ratio of applications declined by one lender, but granted by another, although off the high’s of last year, remains at 23.1%. “This ratio highlights the importance of using a bond originator in the finance application process. As a bond originator is able to shop the application to multiple lenders, homebuyers are assured a higher probability of approval and on competitive terms. The ratio indicates that more than 1 in 5 applications would have remained declined had they not been presented to alternative lenders.”

Author: ooba

Submitted 19 Aug 11 / Views 10212