MAIN IMAGE: Rhys Dyer, CEO of ooba Group; Dr Andrew Golding, Chief Executive of the Pam Golding Property Group
Staff Writer
Statistics for the third quarter of 2022 (Q3 ’22) reveal that competition for home loans remains vigorous among home loan lenders, despite the ongoing interest rate hikes and rising costs which places further pressure on consumers.
This bodes well for the immediate future for property practitioners as there is still a lively market to explore on various levels of the industry.
“Year-on-year property price growth in most provinces has slowed to rates well below inflation,” says Rhys Dyer, CEO of ooba Group.
“This should improve the affordability of property as wages grow quicker than property prices. This coupled with the banks’ willingness to continue to approve home loans at attractive terms, makes investing in residential property an attractive proposition – especially for first-time homebuyers.”
Buying down
“Looking to the first-time homebuyers’ market, our average purchase price fell from an average of R1 117 398 in Q3 ‘21 to a more affordable level of R1 087 089 in Q3 ‘22. This reflects the impact of increasing interest rates and cost of living on first-time homebuyers as they scale back and select properties within their affordability range.”
Dyer notes that investment and buy-to-let properties have seen a sharp uptick – recording year-on-year growth of almost 30% in Q3 ’22. “This figure is indicative of the demand for property rentals as rising interest rates put the dream of homeownership on hold for the time being.”
Segments’ trends
Interestingly, 58% of the approved bonds processed by ooba over Q3 ’22 were for properties of R1.5 million-plus – up by 1% from Q3 ’21 and a significant 9% from Q1 ‘20.
“The work-from-home phenomenon coupled with historically low interest rates throughout the pandemic saw many ‘scaling up’ as home loan repayments became more affordable,” explains Dyer.
According to Dr Andrew Golding, Chief Executive of the Pam Golding Property Group there is still a strong appetite for investment or buy-to-let residential property.
“Encouragingly for investors, the pace of the slowdown is decelerating, suggesting that a lower turning point may be approaching. Despite rising interest rates, renewed price pressures and subdued economic growth prospects, activity in the national housing market continues to be supported by still favourable lending conditions – with competitive average concessions relative to prime, and rising mortgage approval rates enabling many South Africans to invest in their own home.
“Buyers appear to be taking advantage of investment opportunities in the housing market facilitated by the still favourable lending conditions, with applications for investment or buy-to-let properties rebounding strongly in recent months, rising to 8.6% of total mortgage applications in September,” Golding said.
Dyer says properties ranging from R759 000 to below R1.5 million make up 31% of instructed bonds – down by 2% from Q3 ’21 and 4% from Q1 ’20 while properties below R750 000 account for 11% (up by 1% from Q3 ’21 and down by 5% from Q1 ‘20). This indicates a shift in home buying trends in this property price segment post-COVID-19 pandemic.”
He says the approval rates for 100% loan applications remain elevated at 84.1% in September 2022, however, demand for 100% loans decreased from 60.8% in August 2022 to 56.6% in September 2022. He says this indicates that more homebuyers are unable to meet affordability requirements on a 100% loan and are needing to put down deposits to qualify for the home loan.
Looking ahead, Dyer expects that residential market volumes will continue to decline in the short-term, largely due to additional interest rate increases set to take place in November 2022 and Q1 2023. As demand slows, the supply of property increases and prices adjust, with a correlating decline in property price inflation. This sets the stage for a more active market,” he stated.
Golding said various positive indicators reflect consumers’ sustained appetite for home ownership and investment in residential property, which is encouraging, particularly when seen against the backdrop of ongoing global and local economic challenges.
