Home loan approval rates are going up and deposits are going down – here’s how much people are paying

South Africa’s property market is in a state of paralysis as consumers wait for some kind of certainty and stability following the elections later in May, says Samuel Seeff, chairman of the Seeff Property Group.

Seeff said that most of 2019 has been characterised by ‘buyer analysis-paralysis’ with buyers hesitating, sitting on the sidelines and waiting to see how the elections unfold.

Buying a new home has therefore become more affordable as weakening housing demand results in ongoing negative real price growth (after inflation) in the residential property market.

Data from home loan comparison service, ooba, showed that while house prices have continued to move in the right direction over the past year, albeit it at a snails pace, the average deposit for a new home has declined substantially over the period.

For the first quarter of 2019 (Q1 19) ooba’s data showed negligible year-on-year growth in the average purchase price of 1.6% from Q1 18 to Q1 19.

Growth in the average purchase price for first-time buyers was also minimal at 0.5% from Q1 18 to Q1 19.

The good news, according to Rhys Dyer, CEO of ooba, is that banks continue to display a robust credit appetite and are increasingly approving home loans with lower deposit and also increasingly with no deposit requirements.

“This is indicative of the banks’ confidence in the property market and in customers’ ability to repay loans,” he said.

“Our home loan approval rate of 81.3% in the first quarter of 2019 was the highest on record for ooba since May 2007 and importantly, the approval rate on applications without a deposit (100% loans) has increased by almost 8% on Q1 2018,” Dyer  said.

The average deposit as a percentage of purchase price is down by 11.3% year-on-year compared to Q1 2018, from 16.0% of the purchase price to 14.2% of the purchase price in Q1 2019. Similarly, ooba’s statistics showed that deposits for first-time home buyers are down by 21.6% over the same period from 12.5% of the purchase price to 9.8% of the purchase price.

Banks are competing for a bigger share of the home loans market by approving finance at historically low interest rates, ooba said.

The home loan comparison service said that that the average age of bond applicants in South Africa is 38, while the average age for first time applicants is 34.

Seeff said that his branches have seen an uptick in activity, specifically in the core R1.2-R3 million price band, and there is an expectation that buyers will start heading back after the elections. Sellers ready to capitalise on that demand, he said.

“Conditions are favourable for buyers. Economists expect the interest rate to remain flat at least for the next quarter. Mortgage lending conditions have also improved further,” Seeff said.

Read: The 3 things self-employed South Africans need when applying for a home loan

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Home loan approval rates are going up and deposits are going down – here’s how much people are paying