Banks giving 100% home loans, buy now! – 0861 11 11 93 – Call Now!

Property prices in South Africa recorded a positive year-on-year growth of 6.2 percent in December 2011, according to mortgage originator stats. The mortgage originators says although this increase is a positive development for the local residential property market, it predicts that the market will continue to trade sideways in 2012. The December  price index’s revealed that the average house price rose to R870 564 from R819 977 a year earlier.

A month-on-month increase of 3.6 percent was also recorded in December.

The growth in the average purchase price among first time buyers showed a significant increase, with year-on-year (y/y) growth of 14.5 percent to R656 230 in December 2011 from R573 112 a year earlier.Saul Geffen, anticipates that residential property prices will continue to drift sideways throughout 2012 and doesn’t expect the average annual property price growth to exceed inflation by much this year. According to other indicators tracked by Bond Originators, the average approved bond size increased 3.6 percent y/y in December to R722 529 from R697 572 in 2010. The average deposit as a percentage of purchase price increased by 14.1 percent y/y to R148 035, which is an equivalent to the average deposit of 17.0 percent of the purchase price.

Data indicated that the initial bank decline ratio has increased by 6.2 percent y/y to 51.7 percent and the effective approval ratio decreased y/y by 8 percent.

Geffen says the effective approval ratio has been influenced by the changed mix of applications received in December, which typically have lower approval rates.

December applications usually result in a larger rollover of conversions to the following month, given the holidays towards the end of the month, he says.

“With the interest rate anticipated to remain low in 2012 and with property prices remaining depressed the current market represents a favourable environment for buyers.”

Herschel Jawitz chief executive officer of Jawitz Properties believes that even without an interest rate cut by the Reserve Bank on Thursday this is a still a good time to buy a property in South Africa.

“A rate cut would certainly give consumers and buyers a short term impetus to get into the market, but what is not needed is a short term cut in rates followed by an increase in rates later in the year.”

Jawitz says stability and consumer confidence play a critical part in the residential market because without these factors, long term buying decisions cease to exist.

He points out that with property values in real terms as they were in 2007 and rates still at historic lows, the market is offering value but not bargains.

“Provided a long term view is taken, now is a good time to buy.”

The year 2012 is set to excite buyers even more thanks to Absa, one of the big four banks that has decided to grant 100 percent home loans from mortgage originators.

Lew Geffen, chairman of Sotheby’s International Realty in South Africa says after a three year lull, the battle of the banks for home loan market share is about to heat up again benefiting homebuyers and the property market in general.

“This month’s decision by major lender Absa to once again start accepting applications for 100 percent loans from mortgage originators we believe is just the first salvo in the renewed battle,” he says.

Geffen says this move will prompt counter-measures from other banks anxious to retain and gain top quality clients.

He says most lenders are already offering bonds of up to 100 percent to their existing clients in good standing and bonds of 90 percent on average to new clients.

“I am not suggesting that banks will immediately relax their lending criteria. “

“Bond applicants will still need to have excellent credit records, low debt levels and good employment prospects in order to be approved.”

He says just now perhaps they won’t need to have such a large sum of cash on hand to pay a deposit and cover transfer costs.

If inflation tails down later this year as expected, the banks will probably also become more negotiable once again on interest rates.

He explains that bond applicants can expect higher levels of service and faster response times, as banks increasingly relearn that home loan borrowers are very often the most loyal consumers.

Geffen says the results of this shift in attitude will be an increase in the number of loans granted and a decrease in the number of repeat sales for estate agents.

Savvy investors have been watching the market carefully noting that the Cape West Coast is the place to buy into.

According to Justus Brandt, broker/owner of RE/MAX Sunset Coast, whose office services the area from Paternoster to Elands Bay along the Cape West Coast, this property location is one of the hottest and most-sought after nodes among investors.

The areas along the Cape West Coast consist mostly of holiday homes and retirement properties with the majority of property investors coming from other regions.

“Buyers include local retirees and business people to holiday makers and overseas investors.”

Demand for property has been good in 2011 with the expected increase in sales compared to 2010 during the holiday period, especially in Shelley Point Golf Estate, On Golden Mile and Britannia Bay, he says.Brandt says popular properties among investors are houses that are priced up to R1.5 million featuring three bedrooms, two bathrooms with double garage in one of the above mentioned areas.

Most buyers look for properties with a sea view or a location close enough to the beach so that they can take long walks.

Brandt notes that property options along the Cape West Coast cater for a wide range of buyers looking to purchase either vacant stands or homes.

Property prices in the region range from around R160 000 for vacant land to R2.8 million for a beachfront stand in a golf estate.

Vacant small holdings are available from R595 000, while recent house sales reflect selling prices from R575 000 for an entry-level, two-bedroom dwelling to between R950 000 and R1.95 million for a mid-level, three-bedroom, double-story house.Smallholdings typically sell between R1.8 million and R2.2 million while top-level homes start at approximately R2.5 million up to R10 million.

With banks set to loosen their purse strings and grant as much as 100 percent home loans, it might be a good time to buy in Cape Town’s sought-after suburb, the Atlantic Seaboard.

Pam Golding Properties (PGP) reports that despite fluctuating property market conditions, this location continues to retain sound value investment.

PGP points to the appreciation in value of apartments in one iconic building as a prime example. The President occupies a front row position in Bantry Bay, ocean views from every unit with one penthouse apartment selling for R28 million.Atlantic Seaboard and City Bowl, Basil Moraitis, PGP area manager says The President was built in the early 1990s by Sanlam and at the time, its 58 apartments commanded prices in the range of R5 000 to R10 000 per square metre.

That pricing held steady for about five years, then increased to around R12 000 to R15 000 per square metre in 1998, in 2003, the price was R20 000 per square metre.

In 2006, the cost leaped to R40 000 per square metre and it continued escalating to over R55 000 per square metre by 2008 and R60 000 per square metre by 2010, he says. Last year, new sales in the building were concluded in the R50 000 to R60 000 per square metre price range.

The President is one of the best-maintained buildings on the Atlantic Seaboard and coupled with steadily increasing values, this makes it a must-buy property into location, he says. “With 24-hour manned security, the building is the ideal home for those seeking a secure and convenient lock-up apartment, either for holiday or permanent use.” – Denise Mhlanga

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Home loans up as banks relax lending rules

At the height of the property boom in 2006, South Africa’s four major banks were approving an average of more than 30 000 new home loans every quarter.

During 2009 this number had dropped to well below 8 000 as banks tightened lending criteria considerably in response to the global financial crisis, as well as factors such as interest rate increases, high household debt ratios and the effect of the National Credit Act.

However, with sharp cuts in the repo rate over the past couple of years, the prime lending rate has dropped to below its 2006 level and, according to property analysts, all indications are that banks have been slowly relaxing their lending criteria again. The result is that the number of new home loans approved is on an upward trend again, having increased by 10 percent since 2009.

Mortgage Plus recently completed a study of the number of home loans approved per quarter and loan-tovalue ratios of the four major banks – Absa, Standard Bank, FNB and Nedbank – from 2006 to the first quarter of 2011, to assess whether the strict lending criteria applied over the past few years since the economic crisis have eased.

“There is a slow and cautious recovery and there has been a slight drop in the first quarter of 2011, with fears of a double dip recession being mooted. But an upward trend in new lending for the residential market indicates that banks are developing more of a desire for risk,” says analysts .

“Boosting indications that lending criteria have relaxed is the fact the loan-to-value (LTV) ratios are on a similar upward trend. After dropping from an average for all banks and all market segments of almost 90 percent in 2006 to just 79 percent in 2009, they have climbed back up to an average of 82 percent since the first quarter of 2010.”

She says there is a significant difference in LTVs, however, once these are assessed in terms of market segment. Poorer households are accessing home loans of over 90 percent LTV whereas the LTVs for the comfortably off and super-wealthy are around 80 percent and 75 percent respectively.

“A number of factors account for this trend. The first is affordability – it is often simply the case that comfortable and wealthier buyers have cash to put down deposits and have often sold previous homes at a profit, whereas those buying in poorer areas may not have savings or the profits from the sale of a home to invest.

“However, it should also be considered that much of the bad debt on the banks’ books after the downturn in property values and rising interest rates caused many homeowners to default, came from the wealthier sector and higher-priced homes. Also, there has been pressure on the banks to contribute towards South Africa’s low-cost housing backlog by making home loans more accessible to lower income earners.

“There has been comment from the property sector that the strict lending criteria are a major factor constraining house price growth, and that in light of low interest rates this approach may be too conservative – creating something of a buyer’s market,” says Ivins.

However, she says, there is clearly light at the end of the tunnel.

“Interest rates are low, home loan accounts are performing better and lending criteria should become more lenient, which should stimulate prices and demand as household debt comes under control and banks resolve the distressed property sales and properties in possession still on their books.”

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za