Real Estate Investor Magazine South Africa May/ June 2020 | Page 18

INVESTOR INTELLIGENCE
Life after
Lockdown
What comes next for the
residential property market?
1st Quarter
Jan - Mar
2020
Quarter 1
Jan - Mar 2019
Quarter 1
Jan - Mar 2020
R1 225 490
R1 218 686
Quarter 1
Jan - Mar 2019
R944 260
-0,6%
Quarter 1
Jan - Mar 2020
R980 069
3,8%
1200
38
Average age of
bond applicants
1000
Approved bond
Approved bond
R1 051 066
800
(85.8%)
R1 099 225
(90,2%)
4,6%
Approved bond
Approved bond
R851 666
600
(90.2%)
R902 026
(92.0%)
5,9%
Deposit
Deposit
R174 424
(14,2%)
R119 461
Deposit
(9,8%)
-31,0%
Deposit
R92 594
(9.8%)
200
R78 043
(8,0%)
- 18,4%
00
Average purchase price
Quarter 1
Jan - Mar
Quarter 1
Jan - Mar
Average purchase
price
*
for 1st time buyers
Quarter 1
Jan - Mar
Quarter 1
Jan - Mar
2019 2020 2019 2020 2019 2020 2019 2020
65.6% 68.8% 41,2% 41.1% 81.6% 83.4% Prime*
plus Prime*
minus
0.11% -0.03%
Successful
bond approval
rate by one
bank
Additional
successful
bond approval
rate by multiple
banks
34
Average age for
1st time
bond applicants
400
Total ooba
approval rate
Average
interest rate
*Current prime
lending rate = 7.75%
Home loan
applications
are submitted
to multiple
banks, thus
ensuring a
significantly
better
chance of a
competitive
approval
More than
8 out of 10 bonds
processed by
ooba are
approved
Call ooba on 0860 00 66 22, visit www.ooba.co.za
R
hys Dyer, CEO of ooba, says: “Over the past few
quarters, banks were more inclined to offer affordable
and accessible credit. ooba’s approval rate in Q1 20
increased by a further 1.8% since the first quarter of 2019,
with over 83% of our homebuyers successfully securing a
home loan. The approval rate on applications looking for
a 100% loan soared to 82.9% in Q1 20. During Q1 20 an
unprecedented 61% of all applications received by ooba
were for 100% finance, up over 7% from Q1 19’s 57%. Banks
have been steadily reducing their deposit requirements,
while at the same time reducing their interest rates as they
aggressively compete for a larger share of the home loan
market.”
The average interest rate that ooba achieved for
homebuyers in Q1 20 was 0.03% below prime, 14 basis points
cheaper than 0.11% above prime in Q1 19.
With the first quarter of 2020 ending only five days into the Covid-19
national lockdown, the trends analysis depicted an ideal environment
for homebuyers. Bank home loan approval rates on 100% finance
applications were at levels last seen more than 12 years ago. The
Average Purchase Price dropped by 0.6% making acquiring a new
home more affordable in the prevailing low interest rate environment.
16
MAY/JUNE 2020 SA Real Estate Investor Magazine
Dyer says: “Our optimistic outlook in Q1 for market
conditions for the rest of 2020 is now tempered with
significant uncertainty as we wait to for the Covid-19
lockdown to end and to understand how quickly the property
market can get back to ‘business as usual’. In just a few weeks
of April, we have seen unprecedented financial distress, with
many South Africans facing job uncertainty and potential
business failure and the economy likely to shrink significantly
over the remainder of the year.”
Carl Coetzee, CEO of Betterbond adds: “The question
around the pandemic’s impact on the property market is an
important one, as the real estate market is keenly affected by
the overall health of the economy, consumer confidence, and
levels of employment in particular, which means that major
disruptions in other sectors will have at least some impact
on the property market. Having said that, property tends
to be a far more resilient investment type than most. We’ve
seen equities being significantly affected, while property has
remained fairly stable.”
“The question around the pandemic’s
impact on the property market
is an important one, as the real
estate market is keenly affected by
the overall health of the economy,
consumer confidence, & levels of
employment in particular.”
Dyer adds: “Whilst there will be some challenging times
ahead for consumers, we don’t believe that the outlook for
property is all doom and gloom. The prime rate of interest is
at the lowest level it has been since 1973, with the prospect of
potential further rate cuts. For first time homebuyers the cost
of renting versus buying is now swinging very much in favour
of buying, especially for properties below R1m, where there
is no transfer duty applicable. There are likely to be attractive
deals in the market as sellers who have been holding on for
some time to sell their properties are forced to reduce prices,
which should bolster demand in the property industry.
Buyer’s market
“A situation where the supply of property exceeds the
demand for property, bodes well for those looking to
purchase property since prices are generally lower in this type
of market. Add to that the fact that banks are open to offering
100% home loans to qualifying individuals,” says Coetzee.
He adds: “The threshold on transfer duty was raised to R1
million recently, meaning that transfer duty costs are lower
for buyers, and that it is speculated that interest rates will be
dropped by at least a further 25 basis points later this week.
Now is a good time for investors to remain at least slightly
positive about the immediate future of property.”
Home Loan applications
Given the complexities facing buyers in the year ahead, using
a home loan comparison service is more critical than ever
before.  Prospective homeowners can use ooba’s services to
shop around for the most competitive home loan from the
major lenders. By obtaining a home loan pre-qualification
through a Bond Indicator or Qualified Buyers Certificate,
potential buyers will have a clear indication of their credit
score and credit profile, as well as a certificate outlining the
house price range they can afford.
“By pre-qualifying, prospective homebuyers can
confidently make an accurate price offer on their dream
property knowing that obtaining bond finance is a mere
formality,” concludes Dyer.
SOURCE ooba home loans & Betterbond
SA Real Estate Investor Magazine MAY/JUNE 2020
17