House prices up but growth slowing

house-prices-upAccording to the latest statistics released by BetterBond, SA’s biggest mortgage originator, the national average home price has shown positive growth of 9,3% in the year to end-June, compared with just 3,7% in the previous 12 months.

However the BetterBond statistics, which cover 25% of all residential mortgage bonds being registered in the Deeds Office and include applications to, and bond grants from, all the major lending banks in SA, also show that the average home price increased by just 1% in the June quarter, compared with a 6,6% increase in the first quarter of this year. (See table)

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“This clearly illustrates the dampening effect that high cost-of-living increases are having on the real estate market,” says BetterBond chairman Rudi Botha. “In the past three months, the extra funds injected into household budgets by January salary increases and February personal tax cuts have been absorbed by sharp increases in the cost of transport (especially fuel) and utilities (especially electricity).

“As a result, consumers are struggling to make ends meet, and while the demand for property remains high, the decline in disposable incomes is putting a lid on what potential buyers are able to afford – and what banks are prepared to lend them.”

On the other hand, he says, the banks appear to have more confidence in the long-term future of the market than they did a year ago, because the average percentage of purchase price required as a deposit has dropped from 20,9% to 16,3%. “This is also in line with the efforts of most banks now to scale back on unsecured lending such as personal loans and increase secured lending such as home loans, which are a lot less risky.”

In the first-time-buyer sector of the market, the BetterBond statistics show that the average home price rose 7,8% in the year to end-June, compared to a 2,9% increase in the previous 12 months.

However, the average first-time-buyer home price in the June quarter was actually 0,4% below that in the first quarter of the year, following a 2,9% increase in the three months to end-March.

“And here too, the average percentage of purchase price required as a deposit has declined, from 12,1% a year ago to 8,3%,” says Botha. “This means that with price growth having flattened off now, it should be somewhat easier for new buyers to get a foothold in the market.

“Having said that, though, all potential buyers should be prepared for the fact that the banks’ credit granting criteria are still very tough, and that they will more likely than not only be able to secure a loan at an interest rate one or two percentage points above prime.”

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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