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Affordability a Likely Stumbling Block this Year

In the final quarter of 2014 there were 6,07-million residential properties in SA with a combined value of R4,27-trillion. A third of these homes, valued at R2,25-trillion, were bonded, according to the latest Absa Housing Review, which also shows that 3,36-million properties, valued at R2,02-trillion, were unbonded. Absa’s house price data shows that nominal and real year-on-year house price growth was lower in most segments of the market in the first quarter of 2015 as compared with the same period a year ago. Household debt, food and electricity costs and rising petrol prices are all impacting on housing prices.

Buyers have been warned not to be lulled into a false sense of security by the slowdown in property price growth, as rising interest rates are likely to have a big effect on affordability for first-time buyers. “The affordability of property is reflected in the ratios of house prices and mortgage repayments to household disposable income,” says Mike van Alphen, national manager at Rawson Finance, the Rawson Property Group’s in-house bond originator. “When house prices and mortgage repayments increase faster than disposable income, purchasing or paying off a property becomes much less affordable.”

Interest rates were left unchanged at the end of May, and this continues to provide some relief to residents with a mortgage. First-time homebuyers make up 25% of the market nationally, says Seeff chairman Samuel Seeff. “The improved mortgage-lending landscape has greatly aided first-time buying,” he adds. “According to the Oobarometer, the home loan application success rate is more than 75% and about 50% of these are first-time applicants.” But mortgage interest rates are expected to rise from an average 9,25% to 9,5%, and this will affect affordability.


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