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ooba’s June Results Show Ongoing Property Buyer and Lender Confidence

ooba’s June Results Show Ongoing Property Buyer and Lender Confidence

House prices continue to show steady nominal year-on-year and month-on-month growth, according to the latest statistics from ooba, South Africa’s biggest bond originator. In June, the average house price grew 6.6% year on year, and 0.7% month on month to R919,965.

51.7% of ooba’s applications in June were from first-time buyers, which is down marginally by 0.3% year on year. Growth was also recorded in the first-time buyers’ average purchase price, increasing year on year at a slightly slower rate of 1.8% to R694,143. 

ooba’s average approved bond size in June was higher both year on year and month on month by 8.2% and 4.7% respectively. The average approved bond size for first-time buyers has also increased year on year by 7.5% with a month-on-month increase of 4.5%.

“June 2013’s average bond size is our highest average bond size on record,” says Rhys Dyer, CEO of ooba. “This, coupled with the steady nominal growth in house prices, points to greater confidence in the property market.

There are also a number of indicators that demonstrate lenders’ improved appetite for extending credit for home loans. These include:

• Lower average deposits, down by 8.7% year on year to R125,608, equal to 13.7% of the average purchase price.
• Lower initial bank decline ratio, down slightly year on year by 0.5% and month on month by 0.9%.
• An increased percentage of applications declined by one lender and then granted by another, up year on year by 0.8% and month on month by a healthy 2.9% to 28.7%.
• ooba’s increased effective approval rate to 66.1%, which is showing a year-on-year increase of 0.8% and a strong month-on-month increase of 2.1%. In addition, ooba’s trailing effective approval rate, which takes into account approvals that come through after month-end, is 75.1% – up on the 73.4% reported in May.  This indicates that over three quarters of loan applications processed through ooba are now being approved.

“With one of the highest approval rates in the market, ooba continues to prove that using a bond originator gives you a better chance of getting your home loan approved, in the shortest possible time,” says Dyer.

 Full oobarometer analysis:

Indicator	Jun 2013	Jun 2012	Change yr on yr (May 13 vs May 12)	May 2013	Change month on month (Jun 13 to May 13)
Avg purchase price	919,965	863,122	6.6%	913,500	0.7%
Avg purchase price of  first time buyer	694,143	682,042	1.8%	675,116	2.8%
Avg approved bond size	794,357	733,948	8.2%	758,848	4.7%
Avg deposit (as % of purchase price)	13.7% (R125,608)	15.0% (R129,174)	-8.7%	16.9% (R154,652)	-18.9%
Avg age of applicant	37	37	No Change	37	No Change
Avg initial decline ratio (first bank decline)	47.6%	48.1%	-0.5%	48.5%	-0.9%
Ratio of applications declined by one lender but approved by another	28.7%	27.9%	0.8%	25.8%	2.9%
Effective approval ratio	66.1%	65.3%	0.8%	64.0%	2.1%

Your bond has been approved. What happens now?

Your bond has been approved. What happens now?
You’ve found your dream home, made an offer, it’s been accepted and your bond has been approved. It’s all extremely exciting, but there’s still a lot that has to happen before you can collect the keys and move in.
The first thing that you need to prepare yourself for is that the next part of the process takes some time. “There is lots of paperwork and much communication between various intermediaries,” says Careen McKinon, direct sales manager at ooba, South Africa’s biggest bond originator. “The good news is that you’ll have lawyers acting on your behalf, so all you really have to do is wait.”
According to ooba’s statistics, it takes an average of 69 working days for your bond to go from Granted to Registered. The only action that should be required on your part is to pay the relevant costs, and sign the transfer documents and the bond documents. The bank that grants your bond will put you in touch with the attorney who will let you know what you need to do. A step-by-step explanation of the entire process is included at the end of this article.
Occupational rent
In some instances, a buyer might want to move in before transfer has gone through, and in others, the seller might still be living on the property when it has gone through.
“In this case, the person in residence will have to pay occupational rent, which is agreed in the offer to purchase and calculated by the attorney on a pro-rata basis,” says McKinon. “This rent should always be paid through the attorney so that there can be no room for a misunderstanding.”
If you, as the buyer, move in before transfer goes through, it is advisable that you hold off on any major renovations until the property is registered in your name.
“It happens very rarely, but there have been instances where the transfer does not go through for whatever reason, and then the buyer incurs losses on renovations or repairs, so it’s best just to wait,” says McKinon.
Use the time to put money aside
While you wait for the transfer to go through, the best thing that you can do is start putting money aside for your first bond repayment.
“You can significantly reduce the amount you end up repaying on your bond by putting in more than you are required to pay each month,” says McKinon. “Once you’re in a new home, your extra cash will be consumed with getting your house in perfect shape, so while you have a break, try to save.”
Moving in
Another piece of advice for new homeowners is that removal companies charge more at the end of the month than at any other time, so if you have any choice or flexibility about when you move into your property, try to avoid that end of the month crunch.
“Buying a home is one of the most daunting and exciting things you’ll ever do,” says McKinon. “Waiting until you can truly call the property ‘mine’ can be frustrating, but if you use the time to budget and plan, moving in will go a whole lot more smoothly.”
From making an offer to property transfer – all the steps
Step 1: You and the seller sign the offer to purchase.
Step 2: The bank grants your bond and instructs the bond attorney to register it.
Step 3: The seller advises the transferring attorney to transfer the property. The title deed and cancellation figures are requested from the bank at which the current bond is held, and a statement of rates and taxes is requested from the local authority.
Step 4: The bond attorney tells the transferring attorney the amount available for guarantees and requests the draft deed of transfer and guarantee requirements.
Step 5: The Cancellation Attorney is asked to cancel the seller's bond upon receipt of a guarantee for the amount owing.
Step 6: The transferring attorney receives the title deed and cancellation figures and sends a copy of the deed of transfer and the guarantee requirements to the bond attorney. The transferring attorney requests the buyer and seller sign the transfer documents. The buyer pays the transfer costs and the transferring attorney then pays the rates and taxes and the transfer duty.
Step 7: The bond attorney prepares the bond documentation together with the relevant account. The buyer signs the documents and pays the costs. The bond attorney prepares and issues the necessary guarantees, forwards them to the transferring attorney and prepares the bond documents for lodgement in the Deeds Office.
Step 8: Once the transferring attorney has received the guarantees, they are forwarded to the cancellation attorney.
Step 9: The cancellation attorney obtains consent for cancellation from the bank which holds the seller's bond.
Step 10: After all the documentation has been signed and the costs paid, the transfer, new bond and cancellation bond documents are prepared by the respective attorneys for lodgement in the deeds office.
Step 11: All the documents are lodged in the Deeds Office by arrangement with the attorneys concerned. The Deeds Office takes approximately two to three weeks to check the documents before they are ready for registration by the attorneys on the same day.
Step 12: On the day of registration, the bank pays out the loan in accordance with the guarantees issued. Allow at least three months for the registration and transfer of the bond.

Residential property prices growth expected to remain in single digit this year

Residential property prices growth expected to remain in single digit this year

A combination of historically low interest rates and slowing growth in household disposable income will drag down demand for residential property in the near term.

On the back of the latest trends in house price growth and various factors affecting the housing market, single-digit nominal year-on-year price growth is forecast for the full year. Real house price growth is expected to continue to be driven by a combination of movements in nominal prices and consumer price inflation.

According to Absa monthly property price indices for May house price growth slowed down in May, based on nominal year-on-year growth in the average value of homes in the middle segment of the South African residential property market.

This is the result of base effects and a downward trend in monthly price growth since mid-2012, which was expected to eventually cause year-on-year price growth to moderate.

May this year saw middle-segment nominal house price growth tapering off to 11.1% year-on-year from a revised growth rate of 11.7% in April.

Also not helping the residential property market is the fact that economic growth is looking set to battle to exceed 2% for this year as a whole.

Real economic growth came in at a seasonally adjusted annual rate of only 0.9% in the first quarter of this year, after growth of 2.1% in the final quarter of last year.

Contractions in the real value added by the agricultural, electricity gas and water and manufacturing sectors contributed to the low first-quarter growth. The South African Reserve Bank expects real growth of 2.4% this year, improving to 3.5% in 2014. The headline consumer price inflation rate, at 5.9% year-on-year in February,

While the current level of interest rates set by the South African Reserve Bank is at multi-decade lows it has been priced in by the market.

In addition, interest rates continue to move sideways, with prime rate having remained at 8.5% since the third quarter of last year.

The stability of interest rates at these low levels has helped to gradually strengthen residential demand through last year and early this year.

“But it is questionable whether this residential demand strengthening can continue at a time of clear economic weakness, and where we have already seen a steady slowing in growth in the area of real consumer demand as a result,” First National Bank (FNB) property analyst John Loos says.

Loos says this year as a whole, “therefore, a weak economy and resultant weakened disposable income growth leads to the ongoing expectation that house price growth will continue to remain largely in single-digit territory in the near term, due to potential pressure on demand, not far outpacing consumer price inflation of near to 6%.”

Absa property analyst Jacques du Toit says Interest rates were kept unchanged in the first half of 2013, and are forecast to remain at current levels in the rest of the year before rising around mid-2014 to keep inflation under control.

“This interest rate projection is based on current trends in and prospects for the domestic economy and inflation. Continued low interest rates will support the property market and benefit the affordability of housing and mortgage finance,” he says.

LATEST CASE ON LEVIES

LATEST CASE ON LEVIES

In a recent decision (Koka N.O. & Others v Willow Waters Home Owners Association (Pty) Ltd), the High Court has made a ruling which will have a large impact on HOA when an owner of a unit is either sequestrated or liquidated. In the past arrear levies were dealt with by trustees and liquidators as an administration expense, i.e. these levies were paid upfront and before the bond. This will no longer be the case! Whilst a HOA will still be entitled to refuse to issue a levy clearance certificate where the levies are not paid, if a deadlock arises and the owner is then sequestrated, the HOA is going to suffer losses in respect of arrear levies. In the circumstances it is more important than ever for HOA and their managing agents to carefully monitor their levy accounts and to take legal action as soon as possible if levies are not paid on due date. Contact Tim Chase and Martin Bey should you have any queries.

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