FIRST-TIME BUYERS TO DRIVE MODERATE HOUSE PRICE GROWTH AND TOUGHER LENDING CRITERIA IN THE PROPERTY

In 2013, the property market is expected to show moderate growth, and prospective buyers would do well to have a deposit to bring to the table, says ooba, South Africa's biggest bond originator.

“House price growth is expected to continue to show moderate growth during 2013, with significant activity continuing in the first-time buyers market,” says Saul Geffen, ooba CEO.

In 2012, first time buyers averaged at 52.7% of home loan applications and a record 54% was recorded in September 2012.

The average nominal house price recorded by the oobarometer in the 12 months to December 2012 grew 3.9% year on year, from R830,641 in 2011 to an average of R862,940 in 2012.

“Both the global and the domestic economy remains under significant pressure, household debt remains at a high level and nominal house prices continue to grow at a muted pace,” explains Geffen. “We anticipate that lenders will continue to adopt cautious lending practices during 2013.”

The buyer’s market is expected to persist in 2013. “Potential buyers should ensure that they have the ability to access a deposit as lenders continue to fine tune credit policies with a focus on loans below 90% loan-to-value,” says Geffen.

Towards the end of 2012, ooba also recorded an increase in buy-to-let applications, which Geffen says could be influenced by the increasing rental yields recently reported by Tenant Profile Network Credit Bureau and investors’ improved perception of future long term property price growth. “Given the prevailing market conditions, this trend looks set to continue into 2013,” he says.

Despite the moderate house price growth, ooba reported record growth in home loan approvals in 2012. The bond originator’s home loan approvals reached a new high in November following its previous record set in October. The value of monthly home loans approved through ooba in November was up by 313% over January 2009 which was the lowest month during the property market crash and ensuing financial crisis.

For the 11-month period January to November 2012, ooba’s approvals were up 147% over the same period in 2009. The value of home loans approved through ooba in December 2012 was up 49% on December 2011, while November and October were up 30% and 47% respectively on the prior year.

“It’s gratifying to report this kind of growth given the extremely tough few years the industry has experienced,” says Saul Geffen, ooba CEO. “The growth has been driven by a combination of ooba’s increased market share, as well as the improved property market and lending conditions.”

ooba has doubled its overall market share since the beginning of the crisis five years ago, based on market share reports provided by ooba’s major lending partners. ooba originates more than 20% of all new residential home loans in SA.

Geffen also attributes the growth to the value proposition that mortgage originators offer consumers. “One in every five homebuyers use ooba to secure their home finance. Consumers understand that in today’s tough lending environment, using a mortgage originator significantly enhances the chances of securing home loan approval and on competitive terms,” he says.

ooba currently obtains approval for 71% of all home loan applications it processes, which compares favourably with the average bank approval rate of only 52% across the major lenders. “This means homebuyers using ooba have on average a 36% better chance of securing home loan approval.”

He says that the market conditions are being driven by the low interest rate environment coupled with subdued property price inflation and improved lending conditions. He expects the current environment to persist into 2013.

The bottom line in 2013: If you're a seller, price your property realistically and be prepared to negotiate. If you're a buyer, line up a deposit, shop around for a bargain and use an expert bond originator for your best chance to get your home loan approved.