The average approved bond size has increased by 4,5% in the past twelve months, while the average house price has increase by just 2,2%, according to the latest statistics from BetterBond.
“These figures correspond to a decline in the average percentage of purchase price being paid as a deposit in the year to end-August, from 22% to 20%,” says CEO Shaun Rademeyer, “and the overall picture is one of increasing home affordability.”
This is mostly due, he says, to an improvement in disposable incomes, which the BankservAfrica Disposable Salary Index shows as having increased for the fifth consecutive month in July. “Wage increases, declining inflation and a small interest rate decrease have all played a part in this growth, which simply means that many prospective home buyers now have more of their take-home pay available to put towards a monthly bond repayment”.
“This is excellent news for the real estate industry, because it makes the banks more likely to approve home loan applications – and to lend a bigger proportion of the home purchase price. And taken together with the drastic slowdown in house price growth over the past 12 months from 9,9% to just 2,2%, this definitely opens the door to more successful home sales.”
However, Rademeyer says, neither buyers nor agents should take this to mean that the banks are likely to relax their strict credit qualification criteria any time soon. “The economy is in a fragile state and there is a higher risk that borrowers could suddenly become unemployed, so caution prevails, and around 25% of home loan applications submitted are still being declined outright due to credit record problems”.
“What is more, only 36% are receiving immediate approval by the first bank to receive the application, which means that prospective borrowers who are applying for home loans on their own only have a very slim chance of their application being approved.”
By contrast, he notes, BetterBond’s approval ratio is currently 76,6% of all the applications it submits, thanks to the fact that it is able to “rescue” many of those that might initially be rejected. “In any case, the effect is that potential borrowers who apply through us literally have a very good chance of their loan being approved.”
BetterBond statisics show that over the past 12 months, it has been able to secure almost R37bn worth of home loan approvals, and assist almost 34 000 buyers to acquire their new homes, at an average price of R1,1m. The average age of these buyers was 37, and at an interest rate of 10,25%, the average monthly repayment on their loans is R8631.
*The BetterBond Home Loans statistics represent 25% of all residential bonds being registered in the Deeds Office and are thus a reliable indicator of the state of South Africa’s residential property market.