Strong Price growth in January 2012

Category Buying trends

According to the latest statistics released by ooba – South Africa’s leading bond originator - property prices showed positive year-on-year growth of 6.7% in January. This growth is the highest year-on-year price increase since July 2010, when a year-on-year price appreciation of 9.8% was recorded.

The January oobarometer price index reveals that the average house price rose to R850 589 from R797 011 a year earlier. The average purchase price amongst first time buyers continues to show a significant year-on-year increase of 12.8% to R650 574, from R576 675 a year earlier.

According to Saul Geffen, CEO of ooba, the increased activity in the first time buyers market is reflecting in the consistent year-on-year price growth recorded each month since May 2011. He says that 50.92% of applications received in January comprised of first time buyers, up from 48.18% recorded in January 2011.

Geffen says that ooba’s home loan application volumes were 41% higher in January 2012 in comparison to the same period last year, with the value of home loan approvals showing a year-on-year increase of 58%. “ooba recorded consistent month-on-month increases in home loan applications in 2011 and we expect this growth to continue throughout 2012. The increase is attributable to a combination of market, organic and acquisitive growth.”

Other indicators measured by ooba reveal that the average approved home loan size is showing a year-on-year increase of 6.3% in January to R722 900, up from R680 195 a year earlier. The average deposit as a percentage of purchase price increased by 2.7% year-on-year to R127 689, equivalent to an average deposit of 15.0% of the purchase price.

The initial bank decline ratio has increased by 4.3% year-on-year to 50.3% and the effective approval ratio is showing a year-on-year decrease of 5.6% to 60%. Geffen explains that the drop in the approval ratio is primarily as a result of the tightening of credit by one of the banks, and a higher proportion of lower deposit loans as a result of the relaxation in criteria by another bank. Lower deposit loan applications typically have higher decline rates as they are considered more risky. “The relaxation allowing lower deposit loan applications is a positive, even though it initially results in a higher overall decline rate, as ultimately it opens up an opportunity for approving a segment of customers which have limited available funds for cash deposits.”

The ratio of applications declined by one lender but granted by another is showing a year-on-year decrease of 4.7%.

Full oobarometer analysis: