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Hope for home loan applicants

Nov 07 2008 18:33

Johannesburg - Average house prices dropped by 6.6% year-on-year in October, according to the 'oobarometer' released on Friday by mortgage originators ooba.

The decline eclipsed the 5.5% year-on-year decline shown in August.

"After recording a positive year-on-year increase of 3.4% in September, average house prices have again dropped", said Saul Geffen, chief executive of ooba.

He noted that as anticipated, September's increase was not an indication of an upward trend and that the index was expected to continue to show slight negative growth into 2009.

The barometer also showed that the average first-time buyer's purchase price continues to increase gradually - up 4.5% from R536 475 in October 2007 to R560 623 in the same month this year.

Bank decline ratios, which is the average percentage of all home loans applications initially rejected, have shown a slight improvement to 49.1%, a decrease of 1.4% on September's figure of 51%, but still considerably higher at 7.7% up from the prior year.

"Banks are extremely cautious in their approach to lending given the credit crisis, NCA implications and deteriorating economic outlook," said Geffen, adding that, however, average initial decline rates varied widely from bank to bank, ranging from 34.4% to 64.8%.

An average of 32% of applications declined by one lender were subsequently granted by another. However, this ratio also ranged widely, from 24.2% to 39.2% for the different lenders.

Geffen said that the higher decline ratio reflected the impact of the National Credit Act, as the new legislation required banks' credit decisions to be based on net disposable income, which had been materially impacted by high interest rates.

According to the oobarometer, the average deposit continues to increase in October, now averaging 19.7% of purchase price. This is a sharp year-on-year rise of 48.1% from the previous year.

- I-Net Bridge

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Sage
Dec 01 2008 11:39 Report this comment

6.6% decease after a 100% increase over the 2004 to 2006 period is a sick joke! Salaries didnt rise fast enough and that is why people supplemented their incomes with debt to afford the overpriced houses and the debt meldwn is the result! The Government is to blame 4 the meltdown because they failed 2 quell demand for housing.bottlenecking development and approval of projects and settling political scores with the DA held areas by nt approving their development led to market shortages!

Richard
Nov 08 2008 16:09 Report this comment

Anon - not really. It's a better idea to rent and save into a money market fund anyway. Your rent is far less than the purchase repayment price and saving will mean you benefit from high interest rates. Also, house values still have some falling to do. Save and be happy that you're not on the receiving end of the crunch.

Anon
Nov 08 2008 00:40 Report this comment

Neelsie Naamloos, don't you mean that 99% of the population will just need to put off home buying indefinately, just you and a few super rich fats cats should be afforded that opertunity.

Neelsie Naamloos
Nov 07 2008 21:29 Report this comment

Lee - if the 'average family' wants to make a monthly payment on a property, it will take them ~36 months to save for a 20-25% deposit. If they cannot afford to save, they cannot afford to purchase either. The stricter NCA requirements just postpone their plans by ~3 years.

Lee
Nov 07 2008 19:42 Report this comment

"... the average deposit continues to increase in October, now averaging 19.7% of purchase price." That can be expected, this is a different topic though! In effect, home seekers must accumulate huge deposit amounts, and in accumulating this capital, the banks have access to these funds (the banks enjoy that spin off, im sure). To accumulate this type of capital, when the average family lives from month to month, is impossible.

bobino
Nov 07 2008 19:35 Report this comment

mandla - what can you afford, then work out the bond repayments on R700k and yes NCA is correct and for your local bank to tell you that you cannot afford something you really should not be buying it! Remember all NCA wants the lender to prove is the ability to service the debt and that is where credit commities have tightened there belts.

mandla
Nov 07 2008 19:10 Report this comment

This NCA thing is crazy. I have given up on the idea of buying a house because what the bank say I can afford is way lower than the avarage house but before NCA I was qualifying for R1.2M, now R700K.

Anon
Nov 07 2008 18:37 Report this comment

I think they are once again not putting things in context. Firstly I bet that the numbers of buyers is significantly down compared to last year so actually those that are left should be more likely to be able to get home loans. Simply put that most credit worthy people would be those that could consider loans when the interest rates are at 15.5% but they are being rejected in equal numbers!!!! So actually this is shocking.


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