Banks Continue to Relax Lending Criteria in April

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The latest statistics from the oobarometer price index showed a year-on-year decline in the average purchase price of 6.5% to R 823 483 in April 2011 from R 881 044 a year earlier. The average purchase price by a first time buyer fell by a more moderate 0.2% year-on-year to R625 252. According to Saul Geffen, CEO of ooba, the decline in April points to a further period of declining house prices on the back of the strong growth experienced in the first half of last year. “We anticipate the negative growth trend will reverse shortly after mid-year and show moderate positive price growth for the second half of the year." The average deposit size as a percentage of the purchase price recorded a significant year-on-year decrease of 39.6% to 13.1%, or R108 164. The average approved bond size has increased by 3.7% to R 715 319 in April 2011 from R 689 742 recorded in April 2010. According to Geffen this is linked to the significant relaxation in deposit requirements. "The average deposit for April was only 13% of purchase price, which is significantly improved from the levels seen in 2009, and this opens up a considerably broader homebuyer base who can now afford the lower deposit requirements." Other positive news is that the bank initial decline ratio is 8.7% lower year-on-year at 45.4%, while the effective approval ratio has increased significantly from 57.3% in April last year to 64.4%. Geffen says that the strong April approval rates build on the recent record numbers recorded in March. ooba’s March approval figure was the highest value of approved home loans since October 2008 - two and a half years ago. "The ability to obtain financing is one of the biggest drivers in the property market, so the consistent improvements are positive for the market.” Full oobarometer analysis: Indicator Apr 2011 Apr 2010 Change yr on yr (Apr 11 vs Apr 10) Mar 2011 Change month on month (Apr 11 to Mar 11) Avg purchase price 823,483 881,044 -6.5% 860,492 -4.3% Avg purchase price of first time buyer 625,252 626,719 -0.2% 623,179 -0.3% Avg approved bond size 715,319 689,742 3.7% 725,973 -1.5% Avg deposit (as % of purchase price) 13.1% (R108,164) 21.7% (R191,302) -39.6% 15.6% (R134,519) -16.0% Avg age of applicant 37 37 No Change 37 No Change Avg initial decline ratio (first bank decline) 45.4% 54.1% -8.7% 44.7% 0.7% Ratio of applications declined by one lender but approved by another 21.6% 21.1% 0.5% 22.7% -1.1% Effective approval ratio 64.4% 57.3% 7.1% 64.5% -0.1%

Author: ooba

Submitted 23 May 11 / Views 10799