Property price growth continues to slow
South Africa's residential property market is continuing to experience a moderation in price increases, in line with the slower economic growth predicted for the overall economy in the third quarter, according to the October results released by ooba - South Africa's leading bond originator.
The oobarometer price index showed the average house purchase price increased by 1.4% year-on-year to R832 705 in October 2010 from R820 885 a year ago. This is substantially slower than the double digit year on year growth recorded in three separate months during the first half of the year.
The average purchase price by first time buyers showed a marginal increase in growth, up 0.7% to R601 039 in October from R597 075 a year earlier.
According to Saul Geffen, CEO of ooba, the results are indicative of a slower trend following a strong first half of the year in 2010. "We witnessed strong levels of growth in residential property prices in the first half of the year despite continuing tough economic conditions, so it is not surprising that price inflation is tapering off."
He says that while growth is still slowing, the fundamentals of the property market remain stable, particularly with the low interest rate environment. "There is continued speculation over whether we may see further rate cuts in the future. While we do not expect another cut to have any significant immediate impact on property price growth, the expectation of continued low rates is positive for sentiment."
Other statistics released by ooba showed that the average approved bond size slipped 1.2% to R681 213 in October from R689 785 a year ago while the average deposit increased 13.8% to R151 492, equivalent to 18.2% of the average purchase price.
Geffen says good news for homebuyers is that the average initial decline ratio fell 3.9% year on year in October to 45.7% from 49.6%, while the ratio of applications declined by one lender but approved by another increased 10.6% to 29.2%. Consequently, the effective approval rate across all applications increased a substantial 8.0% year-on-year to 67.6% in October.
The improved approval rate indicates that just over two thirds of homebuyers are successfully obtaining home loans now. This approval rate is considerably up from the lows experienced over the past few years and is a clear indication that lenders are more confident about the property market and the prospects of economic recovery. It also demonstrates the importance of shopping around if your loan is declined as there is a 30% chance you will be approved by another lender."
Full oobarometer analysis:
Article by: www.ooba.co.za