Prospective property buyers are looking online to see what they can afford, as they make the most of the lowest lending rate in recent years, says bond originator, BetterBond.
The group has reported a 123% increase in online pre-approvals since June. “If these pre-approvals translate into sales, it could provide the much needed stimulus the market requires to recover from the lockdown and a recessionary environment,” said Carl Coetzee, chief executive officer of BetterBond.
“Online pre-approval activity is a strong indicator of market interest,” said Coetzee, “and BetterBond’s daily online applications have doubled over the past three months, with more prospective buyers wanting to find out what they can afford at the current Prime Lending Rate of 7%.”
This bodes well for the market which, according to FNB’s Property Barometer, is already showing signs of recovery with a reported house price growth of 1.4% year-on-year in July.
“Currently, 90% of our customers who have pre-approved with us first, will get an offer from at least one of the banks we approach on their behalf,” said Coetzee. “This is good news for the buyer wanting to make the most of the low interest rate.”
There’s much speculation about whether the market rebound we are seeing at the moment can be sustained, said Coetzee.
While it’s hoped that a V-shaped recovery, where house prices show steady growth over the next few months, will persist, there are those who argue that it is not sustainable.
In its latest Property Barometer, FNB takes a cautious view saying a W-shaped recovery, where a double dip in house prices, is possible.
“It may be too early to call on the extent of the recovery, but what we can already see is that the volume of bond applications has rebounded beyond pre-lockdown levels, with BetterBond reporting a 52% increase year-on-year in August.”
With the interest rate at its lowest in over five decades, more buyers are finding that they can now qualify for a bond to buy property. “This must be a driver of the increased activity,” says Coetzee.
“The average number of monthly online pre-approvals has doubled in the past three months, jumping up significantly from the customary monthly average over a six-month period. Also, the fact that this higher average has been sustained over three months suggests that it is not just a result of pent-up demand from the lockdown period,” said Coetzee.
Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, is confident that the favourable lending environment will be enough to sustain a robust recovery. “We remain optimistic about the property market based on the fact that RE/MAX SA recorded record-breaking reported sales totals of R2.4 billion and R3.3 billion in July and August respectively.
“We hope that this V-shaped property market recovery will continue, but we are also closely monitoring the economy to determine whether it will turn into more of a W-shaped, double-dip market recovery.”
“With the current lending environment, it really is a buyers’ market. Applying for pre-approval is a good way of securing a desired property at a market-related price, while the interest rates are so favourable. If this buyer interest translates into sales, the market certainly has a greater chance of achieving that sought-after V-shaped recovery over the next few months,” said Coetzee.