House prices & home loan applications

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11 Dec 2012

South African home buyers, investors and sellers can expect a further real house price deflation for most of 2013, according to a recent report.

The average nominal value of homes in November was R778 200 for small homes (measuring 80 to 140 square metres), medium-sized (141 to 220 square metres) R1 064 800 and large homes (221 to 400 square metres) R1 575 500.

The November Absa House Price Index reveals that middle-segment home values showed a nominal rise of 5 percent year-on-year (y/y) after increasing by 3.3 percent y/y in September.

The FNB House Price Index revealed that house price growth will reach a low of around 4 percent.

Read the article here.

In the first eleven months of the year house prices were unchanged compared with the corresponding period last year, largely impacted by price deflation in the small segment of the market up to August this year, according to the report.

Writing in the report, Jacques du Toit, property analyst at Absa Home Loans, says real price deflation was still evident in middle-segment housing up to October, although momentum is slowing down, with the small and medium-sized categories showing some real y/y growth in October.

He explains that real price calculations are based on nominal prices deflated by the headline consumer price index.

Consumer price inflation was 5.6 percent y/y in October, averaging 5.7 percent y/y in the first 10 months of the year.

The average nominal value of homes in November was R778 200 for small homes (measuring 80 to 140 square metres), medium-sized (141 to 220 square metres) R1 064 800 and large homes (221 to 400 square metres) R1 575 500.

Du Toit says economic growth for the full year is forecast at around 2.5 percent, with global economic trends and domestic developments to be key drivers of the country’s economic performance in 2013.

“With house price growth slowing down on a month-on-month basis since mid-2012, y/y price growth is expected to be reflective of this development in the first half of 2013,” he says.  

He says relatively low nominal house price growth is forecast for the next 12 months, and with headline consumer price inflation projected to average around 5.5 percent in 2013, some real house price deflation may still occur for most of 2013.

ooba currently obtains approval for 71 percent of all home loan applications it processes, which compares favourably with the average bank approval rate of 52 percent across the major lenders.

Meanwhile, ooba reports a high in approved home loans for November, exceeding its previous record set in October.

The value of home loans approved through ooba in November is up 30 percent on November 2011, while October was up 47 percent on the prior year.

This boosted ooba's performance for November to 313 percent higher than ooba’s historical lowest month during the property market crash and ensuing financial crisis in 2009, according to the mortgage originator.  

Saul Geffen, ooba chief executive officer says that the improved market conditions are a result of the low interest rate environment coupled with subdued property price inflation and improved lending policies.

He expects the current environment to persist into 2013.

For the 11 month period January to November 2012, ooba’s approvals are up 147 percent over the same period in 2009, and up 42 percent on 2011.

The mortgage originator has doubled its overall market share since the beginning of the crisis five years ago, based on independent market share figures – and Geffen attributes the company’s growth to the value proposition that mortgage originators offer consumers.

“One in every five SA home buyers use ooba to secure their home finance and consumers understand that in today’s tough borrowing environment, using a mortgage originator significantly enhances the chances of securing home loan approval and on competitive terms,” he says.

He says ooba currently obtains approval for 71 percent of all home loan applications it processes, which compares favourably with the average bank approval rate of 52 percent across the major lenders.

“Home buyers using ooba have on average a 36 percent better chance of securing home loan approval.”

He adds that they have forged strong partnerships with banks and real estate agencies including Pam Golding Properties, Seeff, Sothebys, Harcourts, Wakefields, Jawitz and Maxprop. - Denise Mhlanga

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