Slight Growth in Residential Property Price in November 2011

Property prices showed positive year-on-year growth in November for the first time since August, according to the latest results released by ooba – South Africa’s leading bond originator.

The November oobarometer price index revealed that the average house price rose 2.4% year-on-year to R840 316 from R820 818 a year earlier. Month-on-month property prices also increased by 2% in November.

The growth in the average purchase price amongst first time buyers showed a significant increase, with year-on-year growth of 12.4% to R639 143 in November 2011 from R568 703 a year earlier.

Saul Geffen, CEO of ooba, says residential property prices are likely to continue to drift sideways in 2012, impacted by poor economic growth, resulting in negative real growth in property prices.

The oobarometer also reflected a number of other positive outcomes for the South African residential property market. These included a 3.6% increase in the average approved bond size to R724 495 in November from R699 301 a year ago, while the average deposit decreased by 6.8% to R115 821. The average deposit is now equivalent to 13.8% of the purchase price.

The initial bank decline ratio has increased by 3.3% year-on-year to 49.2% and the effective approval ratio decreased year-on-year by 6.5%. Geffen says that this has been primarily impacted loan-to-value relaxation by banks, as lower deposit loans have higher decline rates. The effective approval ratio has also been influenced by the mix of business received in November, particularly a higher proportion of first time buyers who generally require 100% bonds, and which have lower approval rates. 52.47% of applications received in November comprised of first time buyers, up from from 48.91% in November 2010.

The ratio of applications declined by one lender but approved by another also decreased by 8.7% in November to 24.2%.

ooba has recorded a substantial increase in the number of home loan applications submitted during November 2011, as well as a significant rise in the value of approved home loans.

The company’s latest statistics reveal that the number of home loan applications during November 2011 increased by 36% from November 2010. The statistics also revealed that November was a record month for the value of approved home loans, which increased by 33% in comparison to November 2010.

According to Geffen, the value of approved loans in November are the highest recorded since May 2008, over three years ago. He says that ooba’s increased market share, as well as organic growth from the improved property market and lending conditions, has benefited the application growth.

The number of applications through ooba in November 2011 are 55% up on the lowest number of applications recorded, which was in January 2009. However, the number of applications are still 51% off the peak volumes in May 2007. The value of approved home loans is up 216% from January 2009. However, the value of approved loans for November 2011 is only 29% of the peak in May 2007.

Geffen says that ooba has recorded consistent month-on-month increases in home loan applications since the beginning of 2011 and expects this growth to continue into 2012. He attributes the rise in applications and approved home loans to the consistent improvement in the bank lending criteria throughout 2011. “In addition, the reduction in interest rates of 650 basis points since 2008 has improved affordability and reduced the cost of servicing a bond significantly. The record low interest rates, coupled with subdued property price inflation, increased bank approval rates and lower deposit requirements and increased bond sizes, will continue to positively influence the property market.”

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