Statistics for the first quarter of 2022 (22Q1) from home loan comparison service Ooba, indicate a lending environment that still favours entry into the property market as slowing house price growth coincides with more accessible home loan finance.
“The rising interest rate cycle has some people believing that now is not the right time to enter the property market.
“Whilst the anticipated increases to the prime lending rate during the remainder of 2022 will see home loan repayments rise from the current levels, the modest pace at which interest rates are expected to rise suggests that homebuyers should still continue to benefit from a relatively low-interest-rate environment,” said Rhys Dyer, Ooba CEO.
The latest statistics from ooba show a nominal 2.9% year-on-year property price growth for 22Q1, with the average purchase price up marginally from R1,386,785 in 21Q1 to R1,426,483 in 22Q1.
Dyer said that this translates into good news for those looking at entering the property market.
“Despite a higher inflationary environment impacting the cost of goods like food and fuel, the average purchase price for first-time homebuyers is effectively the same as it was a year ago, at R1,131,905 up from R1,127,776, given the nominal increase of 0.4% from Q1 21 to Q2 22.
“There are therefore still good opportunities for first-time homebuyers to enter the market now.”
Gauteng South & East remains the most affordable region for first-time homebuyers, with an average purchase price of R973,499 in 22Q1 – the only region in South Africa with an average first-time buyer purchase price below R1 million.
By contrast, first-time buyers paid an average of R1,592,777 in the Western Cape in 22Q1 – the highest average price in-country during 22Q1 and a record high for the region.
He added that competition amongst South African banks for home loans is expected to remain strong throughout 2022.
“The banks have reacted strategically to buyers’ confidence in the property market by making home loan finance more accessible and affordable. The current record low deposit requirements, attractive interest rate discounts and cost-inclusive loans, create an ideal environment for aspirant home buyers,” said Dyer.
“Banks are responding well to the increasing demand for no deposit loans with an approval rate of 82% in 22Q1 in this segment, up on 21Q1’s approval rate of just under 81%.”
Ooba’s latest statistics show that 64% of applications processed during 22Q1 were from homebuyers who required financing for the full purchase price, a 5% increase on 21Q1’s intake of 100% loan applications.
Lower deposit requirements have seen the average deposit as a percentage of the purchase price drop from 10.2% in 21Q1 to 6.7% in 22Q2. Similarly, the average deposit for first-time homebuyers is down from 8.2% in 21Q1 to 6.7% in 22Q1.
Ooba’s statistics show a 6.9% growth in the average bond size from R1,244,884 in 21Q1 to R1,331,368 in 22Q2.
“The 6.9% growth in our average bond size vastly exceeds the 2.9% growth in the average purchase price. This illustrates the increased number of loans that are being granted at high loan to values,” said Dyer.
Bonds with a value of greater than R1,500,000 accounted for 60% of Ooba’s total approved and instructed home loans in 22Q1, an upward shift of 3% on 21Q1’s 57%.
The competitiveness of the home loan environment can be seen in the high ratio of applications declined by one lender but approved by another. Of the home loan applications declined by one bank, 45.3% were approved by another bank in 22Q1.