Residential property prices to trade sideways in 2012

Residential property prices to trade sideways in 2012

Impacted by the poor economic growth environment.

It is expected that residential property prices are likely to continue to drift sideways in 2012, impacted by poor economic growth. However, according to CEO of ooba, Saul Geffen, with interest rates remaining at historically low levels, which may drop further in 2012, home buyers and home owners will continue to benefit.

Geffen says it is expected that the South African residential property market will experience limited real growth in property prices in 2012, impacted by the poor economic growth environment.

He says that 2011’s third quarter economic growth figures have confirmed that South Africa has once again had little real economic growth, which should mean further pressure on the fragile labour market and negative real disposable income growth. “All of this will lead to limited purchasing power. Whilst possible interest rate easing is possible, interest rates are not likely to make a major difference to residential property demand in 2012.

“However, the reduction in interest rates of 650 basis points since 2008 has improved affordability and reduced the cost of servicing a bond significantly. The record low interest rates, coupled with subdued property price inflation, increased bank approval rates and lower deposit requirements, will continue to positively influence the property market.”

Geffen says that the current economic climate is the biggest challenge currently facing the property market. However, there has been consistent improvement in the bank lending criteria in 2011. “The ability to obtain financing is one of the biggest drivers in the property market, so the consistent improvements are a positive indicator for the property market going forward.

“In addition, ooba has recorded significant growth in the number of applications and approved loans in 2011 and this growth is expected to continue. The rise in applications and approvals are attributed to the continued relaxation in lending criteria by the major lenders as well as ooba’s market share growth.

“The company’s statistics reveal that the number of bond applications during November 2011 increased by 36% from November 2010. The statistics also revealed that November was a record month for the value of approved home loans, which increased by 33% in comparison to November 2010. The value of approved loans in November is the highest recorded since May 2008, over three years ago.”

He says that in today’s tough lending environment, the origination value proposition is stronger than ever. “A bond originator is able to shop the application to multiple lenders so that homebuyers are assured of a higher probability of approval and on competitive terms. According to the latest ooba statistics, nearly a quarter of applications that were initially declined by one lender were approved by another. These applications would remain declined if they were not submitted to other banks post the initial bank decline,” concludes Geffen.

* This report was prepared by ooba


Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!