Banks Loosen Purse Strings to Finance Real Estate For Sale

Private Property South Africa
Private Property Reporter

Prospective buyers scouting the market for real estate for sale can look forward to an easier conversation with the bank manager, the latest data from bond originator ooba shows. Banks continued to relax their lending criteria in May, with larger bond sizes being approved and smaller deposits being required from buyers, according to ooba’s latest report. The average approved bond size increased 17,8% year-on-year in May to R716 862, while the average deposit size was significantly lower, falling 18% year-on-year to R155 221, or 17,8% of the average purchase price. While banks are loosening the purse strings for qualifying buyers, not everyone who is looking to finance real estate for sale will get a bond. The average decline ratio has increased marginally from 49,5% in May 2009 to 52,9% in May 2010, according to ooba. While the decline ratio has increased year-on-year, it has shown a slight improvement from April, when 54,1% of all applications were declined. ooba says the year-on-year decline is mainly attributable to the increased volume of 100% bond applications, against which banks are still applying stricter criteria. 100% loans were not allowed a year ago. The ratio of applications declined by one lender but approved by another has also dropped, from 22,6% in May last year to 16,2% in 2010. In April this year, 21,1% of applications declined by one lender was approved by another. Sellers looking to offload their real estate for sale will also benefit, with average prices increasing by 12,2% year-on-year in May to R872 083. This is the third double digit growth percentage recorded this year. The average purchase price for the first five months of 2010 has increased 10,5% over the same period in 2009, ooba said. Despite the improvement in the market, buy-to-let investors and holiday home buyers remain cautious, ooba says. Only 6,3% of applications in May was for these purposes.

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