House prices continue to decline

 

Residential property prices showed a moderate decline during September, according to the latest results released by ooba, South Africa’s leading bond originator.

The September oobarometer price index revealed that the average house price decreased by 2% year-on-year to R838 645 from R855 729 a year earlier. Positive growth of 1.1% was recorded on a month-on-month basis in September.

Saul Geffen, CEO of ooba, expects the current trend of monthly nominal slight negative or slight positive growth swings to continue for the remainder of the year. He attributes this volatility primarily to the changing mix of buyer profiles and properties purchased relative to the base year in 2010.

The continued growth in the average purchase price amongst first time buyers, with year-on-year growth of 6% to R 619 920 in September 2011 from R 584 890 a year earlier, reflects a trend of increased activity for first time buyers.

Geffen says the average first time buyer’s purchase price has seen consistent growth in the past quarter, a trend which he ascribes to the shifting economic demographics in SA, largely influenced by the emerging black middle class, combined with the low interest rate environment and the ongoing easing in lending conditions, especially in regard to deposit requirements.

ooba’s statistics show that 52% of applications are from first time buyers, and 45% of applications are from black buyers.

He adds that rising housing costs and increased municipal and utilities tariffs are causing many home owners to opt for smaller, more cost effective houses, which is altering the mix of properties in the index. “The rising costs of home ownership and the changing economic and racial demographics amongst home buyers are influencing demand at the lower to middle end of the housing market.”

The ooba data further revealed that the average approved bond size increased 6% year on year in September to R731 828, compared with R690 331 a year earlier, as deposits as a percentage of purchase price has reduced. The average decline ratio during September decreased by 0.7% year on year, from 46.6% in 2010 to 45.9% in 2011.

Geffen says that the average deposit as a percentage of purchase price also fell 34.2% year-on-year to R106 817, equivalent to an average deposit of 12.7% of the purchase price. “This is a significant improvement from the levels seen in 2009, and opens up a considerably broader homebuyer base who can now afford the lower deposit requirements.”

In September, the ratio of applications declined by one lender, but granted by another, was 22.5%. “This ratio still highlights the importance of using a bond originator in the home loan application process. A bond originator is able to submit the application to multiple lenders and homebuyers are therefore assured a higher probability of approval and on competitive terms.”

 

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