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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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
Growth in the average purchase price for first-time buyers was also minimal at 0.5% from Q1 18 to Q1 19.<\/p>\n
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.<\/p>\n
“This is indicative of the banks\u2019 confidence in the property market and in customers\u2019 ability to repay loans,” he said.<\/p>\n
“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\u00a0 said.<\/p>\n
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\u2019s 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.<\/p>\n
Banks are competing for a bigger share of the home loans market by approving finance at historically low interest rates, ooba said.<\/p>\n
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.<\/p>\n
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.<\/p>\n
“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.<\/p>\n