The average purchase price for a house in South Africa right now amid shifting banking trends

Despite the ongoing upheaval caused by the pandemic, coupled with civil unrest in KwaZulu-Natal and Gauteng, data from home loan comparison service Ooba shows that lending conditions remain advantageous to home loan applicants.

Rhys Dyer, CEO of Ooba, said: “The pandemic has drastically changed consumer behaviour as well as banking trends, resulting in a surprising boom in the local residential property market over the past twelve months.

“Continued competition amongst the major banks for a bigger share in the home loans market has translated into higher approval rates as well as offers of attractive interest rates below prime.”

Local interest rates also remain at their lowest level in fifty years, he noted.

“These factors combined suggest that home buying and mortgage lending have to date remained relatively immune to the pandemic. Despite slower growth in property prices for this quarter, we expect growth in residential property prices to continue,” said Dyer.

The Oobarometer data shows a retreat in the third quarter from previous double-digit to single-digit property price growth with the average purchase price increasing by 5.4% year-on-year compared to the third quarter of 2020 (Q3 20).

“The local banking industry also appears to be optimistic about the future of the South African residential property market. The current lending landscape remains fiercely competitive, which is evidenced in the softening of their deposit requirements and their approvals at interest rates on average below prime,” said Dyer.

Ooba’s stats for Q3 21 shows that the average deposit as a percentage of the purchase price declined by 10.5% year on year.

Ooba said it secured an average interest rate of 0.14% below prime in Q3 21 for its successful home loan applicants, 23 basis points cheaper than Q3 20’s prime plus 0.09%.

Of all home loan applications received by Ooba in Q3 21, half were from first-time homebuyers, almost 63% of Ooba’s first-time buyer applications in Q3 21 were for zero-deposit bonds compared to 60% in Q3 20.

“Zero-deposit bonds are very sought after amongst first-time homebuyers. Our approval rate for 100% bond applications this quarter was 81.5%, up by 1.4% on the third quarter of 2020. The willingness of banks to offer low or no deposit loans creates the ideal environment for new entrants to the property market,” said Dyer.

With the lower cost of borrowing boosting affordability, Ooba’s statistics show growth in homebuyers buying alone as opposed to co-buying, to become the exclusive owners of their property.

This segment of homebuyers has grown to close to 60% of Ooba’s applications processed since the beginning of the pandemic, it said.

“Purchasers buying properties as buy-to-let investments increased to 7% of applications received by Ooba in the third quarter, compared to 5% in the third quarter of 2020. Current lending and buying conditions are perfect for property investors,” said Dyer.

Banks’ decisions on credit and pricing can vastly differ, as indicated by the record high ratio of 47.5% of applications that are initially declined by one bank, but approved by another bank in the Oobarometer statistics.

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