South African house price growth is expected to remain subdued and in low single digits in nominal terms well into 2012, according to Standard Bank.
The bank’s latest property report revealed that the median house price recorded marginally negative growth of -0.5 percent year-on-year (y/y) in October from a revised zero percent y/y in September.
The bank’s latest property report revealed that the median house price recorded marginally negative growth of -0.5 percent year-on-year (y/y) in October from a revised zero percent y/y in September.
Standard Bank Home Loans research analyst Sibusiso Gumbi says consumer spending power is still low as seen in the CPI figures that rose to 5.7 percent y/y in September from 5.3 percent in August.
He says growth in total credit extension to households continued to slow in September to 5.0 percent y/y, from 5.2 percent y/y in August.
Growth in mortgage advances saw a slight uptick in September, growing by 2.2 percent y/y, from 1.6 percent y/y in August, he says.
Meanwhile, mortgage originator Ooba’s oobarometer price index showed a negative y/y price growth of 1.1 percent to R823 476 in October down from R832 705 in October 2010.
The report indicates that the average first-time buyer’s purchase price increased by 4.1 percent to R625 483 while the bank decline ratio decreased by 1.30 percent in October to 44.4 percent.
Saul Geffen, chief executive officer of ooba, says property prices have continued to drift sideways tending towards slight negative nominal price growth for the last two quarters.
“The average first-time buyer’s purchase price has seen consistent growth over the past six months, thanks to sustained lower interest rates, combined with the ongoing easing in lending conditions,” says Geffen.
The proportion of first-time buyers as a percentage of total applications rose to 52.71 percent up from 52.0 percent in September 2011 and 47.63 percent in October 2010.
Geffen explains that rising housing costs and increased municipal and utilities tariffs are causing many home buyers to opt for smaller and more cost effective houses, which shifts the mix of properties in the price index.
“The rising costs of home ownership and the changing economic and racial demographics among home buyers are influencing demand at the lower to middle end of the housing market.”
The oobarometer revealed that the average deposit size decreased by 1.1 percent in October. The average deposit is now equivalent to 18.1 percent of the purchase price or R149 089.
He adds that the average approved bond size dropped slightly in October by 0.9 percent to R674 387 from R680 455 a year earlier. – Denise Mhlanga
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