In 2013, South Africa saw slow but steady recovery in the property market, paving the way for greater growth in the year to come.
"The property market growth that we have witnessed in the past 12 months has been underpinned by low interest rates, affordable house prices and increased lender confidence," says Rhys Dyer, ooba CEO.
"Simply put, residential properties are still priced appealingly, low interest rates make repayments affordable and banks are more willing to lend money to prospective home owners."
The average house price recorded by ooba for 2012 was R862 940, while the average house price recorded for 2013 was R911 322, up 5.6%. In 2013, ooba achieved approvals for, on average 74.21% of the home loans it processed.
Reduced deposits indicate improved lending appetite
As an indicator of lender confidence, banks are approving bonds with slightly lower deposits than the year before. On average, buyers offered a 14.66% deposit in 2013, down from 15.22% in 2012.
"While banks are now more prepared to lend at lower deposits, with the availability of 100% bonds becoming more common, it is important to note that any prospective home owner’s best chance of securing a bond is still saving up for the biggest deposit possible," says Dyer.
The rise of the first-time buyer and partnerships
In 2013, on average, the majority - 52.47% - of homes purchased were by first-time buyers. "It’s good to see that young first-time home buyers are gaining a foothold on the property ladder, and that market conditions have supported them in doing so," says Dyer. "We expect this trend to continue into 2014."
Many buyers were also purchasing houses with partners, to offset the costs and improve affordability. The average purchase price of first-time home buyers increased 5.25% from R658 901 in 2012 to R693 484 in 2013.
What 2014 will hold
Estate agents are reporting that in the past year, a number of metropolitan areas which had an oversupply of properties are now experiencing stock shortages. Building activity growth is also showing nearly flat growth, meaning that not many newly built properties are coming onto the market for sale. "This could signal the start of a steeper housing price increase in 2014," says Dyer.
Consensus forecasts predict an interest rate increase towards the latter half of 2014.
"While this will impact consumers’ ability to afford to buy homes, any increase is likely to be small, given the still vulnerable state of the household sector," he says.
At the same time, ooba’s metrics as well as the National Credit Regulator’s data shows that lenders have eased their lending criteria, improving access to finance for homebuyers.
"Although reduced levels of supply may drive increased prices, we believe the improved lending criteria and still low interest rate environment, will contribute to ongoing positive growth in the number of property market transactions in 2014," says Dyer.
New homes for South Africans
Overall, the South African property market ended strongly in 2013, and it is anticipated that 2014 will be another year of positive growth.
"We’re looking forward to another year of positive news in the property sector, which means we’ll be putting many more South Africans in new homes in 2014," says Dyer.
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