Price data confirms fears

House price growth, while positive, remains below the very strong levels recorded earlier in the year as the residential property market recovery continues to taper off, according to the September results released bond originator ooba.

The oobarometer price index showed the average house purchase price increased by 6.1 percent year-on-year to R855 729 in September 2010 from R806 494 a year ago. The average purchase price by first time buyers rose marginally year-on-year, up 1.6 percent to R584 890 in September from R575 811 a year ago.

Kay Geldenhuys, National Property Finance Processing Manager at ooba, says the slow trend in house price growth is to be expected considering prices recovered very strongly in the first half of the year.

"The impact of the recent rate cutting cycle has largely fed through to the property market already and we do not expect much further stimulus from this. However, while house prices have decreased from the double digit growth experienced earlier in 2010, we still expect growth to be in excess of inflation for the remainder of the year."

The ooba statistics also showed that the average approved bond size was almost flat year-on-year, down a marginal 0.7 percent to R689 939 for the twelve months to September from R694 530.

The average deposit as a percentage of purchase price rose significantly to 19.4 percent (equivalent to R165 790) year-on-year in September from 13.9 percent (equivalent to R111 964) a year earlier. Geldenhuys says, however, that this significant increase is largely due to the mix of business received in September rather than suggesting that banks are applying stricter deposit criteria.

There was some positive news for house buyers with the effective decline ratio falling by 6.8 percent year-on-year to 32.2 percent from 39 percent, giving an effective approval rate of 67.8 percent in September 2010. This results from the average initial decline ratio falling 1.8 percent in the year to 46.6 percent from 48.4 percent and the ratio of applications declined by one lender but approved by another increasing by 11.4 percent to 30.9 percent in September from 19.5 percent a year earlier.

She says it is important that consumers are not disheartened if their first bond application is turned down.

"Different banks have different lending criteria and, as these statistics show, it is vital that consumers shop around when looking for a home loan. Even if a first application is accepted by one lender, by shopping around consumers can also negotiate an improved rate concession, which would save them thousands in interest over the term of the loan.

"Although house price growth is expected to continue to moderate over the coming months, given the current slower growth in economic activity, the fundamentals of the housing market remain sound and positive nominal house price growth is expected for the remainder of 2010," concludes Geldenhuys.

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