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21 May 2014

Estate agents report that banks appear to be gaining confidence in lending, which is good news for all buyers, especially first-timers.

Banks are confident in lending which bodes well for all property buyers, and home loan dependent buyers have made a comeback to the Cape market.

According to Pam Golding Properties (PGP) managing director for the Western Cape region, Laurie Wener, in the past few months, they have seen a noticeable return of mortgage-dependent buyers to the Cape’s residential property market.

She says after a long period in which PGP has seen concluded transactions mainly dominated by cash buyers, in late 2013 and early 2014 there has been a resurgence of buyers entering the market with bond finance required to secure their purchase. However, this has not diminished the number of cash buyers still active in some areas.

Wener notes that these mortgage-dependent buyers are mainly buying homes priced between R3 million and R8 million with a typical loan to value ratio of around 50 to 60 percent.

They are family buyers, both existing Capetonians and those relocating from up-country provinces, who want to buy close to good schools, and in established suburbs such as the Southern Suburbs and Atlantic Seaboard, as well as the Western Seaboard, where the beachfront lifestyle and value for money are seen as key appealing factors.

“The surge in mortgage-dependent buyers is a sign of confidence in the recovery of the residential property market, as well as indicating a slight easing of financial institutions’ lending criteria,” she says.

Meanwhile, April data from ooba shows that now is the time for first-time buyers to get into the property market.

At least 55 percent of the mortgage originator’s total home loan applications were from first-time buyers - the highest ratio on record.

Data reveals that the Average Purchase Price was R947 189 and continued to show steady year-on-year (y/y) growth of 4.2 percent with the First-time Buyer’s Purchase Price recording a 9.6 percent y/y increase to R743 053.

The Average Approved Bond Size of R803 811 recorded y/y growth of 5.5 percent and the Average Approved Bond Size of First-time Buyers at R658 643 is 9.6 percent higher y/y – ooba’s Approval Rate remained high at 74 percent, indicating that ooba continues to secure an approval for more than seven out of ten home loans that it processes.

Rhys Dyer, ooba chief executive officer, says data shows a healthy lending environment and growing property market.

“This is particularly relevant for first-time buyers, at a time when lending conditions are favourable, interest rates are still low – despite the recent increase – and there is further potential for property price growth in this bracket,” he says.

Shaun Rademeyer, BetterBond Home Loans chief executive officer, points out that despite the fact that home loan applications can be made online, many home buyers still prefer to use estate agents, mortgage originators and consultants to guide them through the actual buying process in a series of personal interactions.

Rademeyer says this suggests an increasingly relevant role for originators as the interface between potential borrowers and lenders – and especially for those who can successfully combine ‘old fashioned’ personal service with the speedy responses enabled by superior technological capabilities.

Mortgage originators, he points out, experience a much higher rate of growth in the value of home loans they are able to get approved than the national rate of growth in mortgage lending as stated by the Reserve Bank.

“The national rate stood at an annual 2.9 percent at the end of March and by contrast, our figures show that at the end of March, we had achieved a 9 percent y/y increase in the total value of the loans for which we secured approvals.”

Originators are successful because they are often able to ‘rescue’ applications that have been declined by borrowers’ own banks and get them approved by a different institution.

Furthermore, he says would-be buyers ask a lot of questions and need a real person to respond and they also want someone to motivate their individual application and submit it to multiple banks if necessary, and if they get several acceptances, they want help to choose their best loan option, he adds. – Denise Mhlanga.