While residential property prices continued to decline in February 2011, following the sharp recovery in the first half of last year, according to ooba - South Africa's leading bond originator - this does present a good buying opportunity for new homebuyers.
The oobarometer price index recorded a year-on-year decline in the average purchase price of 7.0% to R832 105 from R895 031 a year earlier. There was, however, positive month-on-month growth of 4.4% since January. According to Saul Geffen, CEO at ooba, the improvement in month-on-month statistics in purchase price growth indicates that we may be over the worst. "This is the first month-on-month increase in average purchase prices since September 2010 and is an encouraging sign." In another positive sign, the effective approval rate continued to show a year-on-year increase of 5.0% to 64.8%. This was borne out by a reduction of 5.6% in the average initial decline ratio to 45.9% while the ratio of applications being declined by one lender but approved by another rose 1.4% to 23.3%. Geffen says this continued relaxation in lending criteria by the major lenders is a positive indicator for the housing market. "The ability to obtain financing is one of the biggest drivers in the property market, so this improvement is an indicator for the health of the property market going forward." In other statistics published by ooba, the average approved bond size fell 7.6% year-on-year, in line with the lower year on year purchase price to R666 836. The average deposit size as a percentage of the purchase price also recorded a year-on-year decrease of 3.1% to 19.9%, or R165 269. Geffen says prospective homebuyers may use the opportunity to negotiate on sellers' asking prices . "Prospective homebuyers, particularly those with a sizeable deposit to put down, may use the current opportunity to negotiate on price." He says the current low interest rate environment also means homebuyers can access cheap finance. In February, for the first time, ooba's home loan applications by first time home buyers exceeded repeat homebuyers applications. First time homebuyers represented 51.50% of all applications in February. Full oobarometer analysis: Indicator Feb 2011 Feb 2010 Change yr on yr (Feb 11 vs Feb 10) Jan 2011 Change month on month (Feb 11 to Jan 11) Avg purchase price 832,105 895,031 -7.0% 797,011 4.4% Avg purchase price of first time buyer 599,105 633,033 -5.4% 576,675 3.9% Avg approved bond size 666,836 721,906 -7.6% 679,615 -1.9%
Avg deposit (as % of purchase price) 19.9% (R165,269) 19.3% (R173,125) 3.1% 14,7% (R117,396) 35.4% Avg age of applicant 37 36 1 Year Older 36 1 Year Older Avg initial decline ratio (first bank decline) 45.9% 51.5% -5.6% 46.0% -0.1%
Ratio of applications declined by one lender but approved by another 23.3% 21.9% 1.4% 25.2% -1.9% Effective approval ratio 64.8% 59.8% 5.0% 65.6% -0.8%