Affordability pressure on homebuyers intensifies

Private Property South Africa
Private Property Reporter

Property statistics for Q4 2015 released by bond originator ooba show house prices continued to grow in excess of inflation as demand for residential property remained buoyant despite a weakening economy.

Compared to Q4 2014, average purchase prices increased by 7,5%, surpassing the R1m mark from R978,502 to R1,051,809. The average purchase price of first-time buyers also continued to climb, increasing by 5,6%. The average deposit paid by first-time buyers dropped by 21%, compared to Q4 2014, which is indicative of first-time homebuyers’ continued ability to access finance in a competitive home loan market.

Ooba’s approval rates in Q4 2015 are 1% down on Q3 2015, alluding to the financial constraints that homebuyers are starting to face as a result of SA’s current tougher economic conditions.

CEO Rhys Dyer, CEO, ooba, says: “On the home loan front, an increasing inflation environment off the back of the rand’s decline will intensify affordability pressure on homebuyers, which will likely increase home loan decline rates across banks.”

Dyer envisages that the mix of home loan applicants will change in 2016. He expects a lower percentage of first-time homebuyers, as they will likely delay their decision to enter the market until the economic environment improves.

Dyer says: “We anticipate that more buyers will purchase within their affordability constraints, and that banks will drive buyers to put down larger deposits. Banks will be watching the consumer affordability position very carefully and will tailor their lending approaches to contain risk.”

This article originally appeared in Neighbourhood, Sunday Times.

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