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