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Johannesburg - While the market is beginning to show signs of life, banks' strict lending criteria are still holding the housing market back.
Although the fall in house prices was at a slower tempo during May, the average deposit as a percentage of purchase price rose sharply and almost half of all applications for mortgage loans are still being declined by the banks.
Ooba's May barometer shows that house prices fell 0.5% on an annualised basis, less than the 2.8% decline in April.
"We believe that the series of interest-rate cuts totalling 4.5 percentage points since December have led to a turning point in the housing market, and that the market will begin to stabilise by year-end," declares ooba chief executive Saul Geffen.
This decline has brought the average purchase price to R773 440 compared with R777 277 in May last year. At the same time the average deposit as a percentage of purchase price has increased sharply to 22.6% (R174 707), compared with 14.4% (R112 085) in May last year.
This reflects the effect of banks' strict lending criteria on the housing market.
"The shortage of finance for deposits, despite good credit records, is a large contributor to the current sluggishness in the market," Geffen explains.
The barometer also shows that banks declined 49.5% of all mortgage applications in May, compared with 46.8% in May last year. On a month-to-month basis there has, however, been an improvement in this relationship, where 50.01%, on average, were declined in April. Only 22.6% of applications declined by one bank are now approved by another, compared with 39.5% in May last year.
First National Bank home loan division property analyst John Loos says the housing market has not yet reached the point where house prices are beginning to rise on a national basis. He expects this to take a further six months or so, especially in light of the significant oversupply of property on the market that needs to be mopped up.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.