ooba Reports Positive House Price Growth and Record Approvals

ooba Reports Positive House Price Growth and Record Approvals The latest statistics from ooba, South Africa’s biggest bond originator, show positive year-on-year  house price growth in July of 6.6% to an average purchase price of R902,900.Healthy price growth  was also recorded in the First-time Buyers segment, with an average purchase price of R710,312,  which is an increase year on year of 8.1%. 53% of ooba’s applications in July were from first-time  buyers, almost 2% higher month on month, indicative of the accelerated level of activity in this market. ooba has also reported a new high in approved home loans for July, exceeding its record set in May  this year. The value of new home loans approved through ooba in July 2013 is up 27% on July 2012.  For the seven-month period of January to July 2013, ooba’s approvals were up 24% over the same   period in 2012 and up 227% over the corresponding period in 2009. “Property price growth and higher home loan approval rates continue to positively influence the  property market, ” says Rhys Dyer, CEO of ooba. “There is renewed confidence in the market  and home buyers have more access to credit for home loans, which has been aided by record  low-interest rates.” Other statistics published by ooba reveal that the Average Deposit recorded was up 16% year on  year and 6.6% month on month to 14.6% of the purchase price. “The increase in the average deposit shows that it is in every buyer’s best interest to put down as high a deposit as possible in order to   increase their chances of approval and improve the pricing of their deal,” says Dyer. The Average Approved Bond Size was 4.1% higher year on year. The Initial Bank Decline ratio dropped by 0.7% year on year – an  average of 47.3% in July – while the ratio of applications declined by one lender, granted by another increased by 2.3% year on year  to 29.9%. Dyer says these figures highlight the need for consumers to shop around. “Homebuyers  are assured a higher probability of an approved loan if they apply to more than one bank, a service  that bond originators such as ooba provide for free.” Lenders’ improved appetite for extending credit is visible in ooba’s  higher effective approval rate.  This is the overall percentage of loans approved once ooba has obtained quotes from multiple banks.  The effective approval rate was 66.8% in July, 1.5% higher year on year. ooba’s trailing effective rate, which takes into account loans approved after month-end is currently  75%, showing that ooba is obtaining approval for more than seven out of every 10 home loan  applications it receives. Full oobarometer analysis Indicator Jul 2013 Jul 2012 Change yr on yr (Jul 13 vs Jul 12) Jun 2013 Change month on month (Jul 13 to Jun 13) Avg purchase price 902,900 846,863 6.6% 919,965 -1.9% Avg purchase price of  first time buyer 710,312 657,069 8.1% 694,143 2.3% Avg approved bond size 771,300 740,733 4.1% 794,357 -2.9% Avg deposit (as % of purchase price) 14.6% (R131,600) 12.5% (R106,130) 16.8% 13.7% (R125,608) 6.6% Avg age of applicant 37 37 No Change 37 No Change Avg initial decline ratio (first bank decline) 47.3% 48.0% -0.7% 47.6% -0.3% Ratio of applications declined by one lender but approved by another 29.9% 27.6% 2.3% 28.7% 1.2% Effective approval ratio 66.8% 65.3% 1.5% 66.1% 0.7%

Ten Things to Think About Before You Start House Hunting

Ten Things to Think About Before You Start House Hunting

When you decide to start looking for a property, you’ll be overwhelmed by the different property types, locations, prices and conditions. By using this checklist from Kevin Mountjoy, national sales manager at ooba, South Africa’s biggest bond originator, you should be able to take your first step up onto the property ladder with confidence.

     1.  Affordability

Of course, the first thing that you need to know is what you can afford. An online affordability calculator like the one found at www.ooba.co.za/calculators, will help you to work out how much disposable monthly income you have. Bear in mind that most banks generally won’t grant a bond for which the repayments will be more than 30% of your gross income.

You can also get a preapproval certificate from ooba so that you know exactly what you can afford, are familiar with the documentation that you need for the applications process, and can show the seller or estate agent that you mean business.

It’s also a very good idea to start saving up for a deposit immediately, as this makes it far more likely that a bank will grant you a home loan, and will decrease your monthly repayments significantly.

 2.    Location, location, location

It’s the estate agent’s mantra, but the most important thing to consider is what area is right for you. This depends very much on your own lifestyle, on where the rest of your family and friends live, where you work and where you like to spend your leisure time.   If the area that’s at the heart of all of this is out of your price range, then start to look at prices in neighbouring areas, or consider purchasing a smaller property, or one with less amenities.

3.     Travel and traffic

Think about the places that you are most likely to travel to from your new home, most often. Drive or travel those routes at the times of day that you are likely to use them to assess whether the area you are considering is a realistic option for your daily commute. Also, identify whether the area has been earmarked for any tolls in the future, as this could add a significant expense on to your monthly budget.

      4.     Maintenance

Be realistic about the kind of home you’ll be able to look after. If you are no good at gardening and don’t have lots of spare time, then don’t buy a property with a large garden. Pools also require lots of work to keep them running well. Don’t fall in love with the idea of the “perfect” house if you’re not going to have the time or inclination to maintain it.

5.     Security

In South Africa, unfortunately, crime is a big concern. Once you have identified a few areas in which you might like to purchase a home, spend some time driving around to note the level of security that other people have – electric fences, barbed wire, burglar bars –to get a sense of the levels of crime in the area. You can also speak to the neighbourhood watch, the local police or the residents to find out more about the safety of the area. And remember that things can change within a couple of blocks, so do this check again for every new property that you consider.

6.     Your lifestyle now

Look for a property that suits your lifestyle now – where you work, where you like to go out, where your children go to school, where you work, whether you like to swim, whether you want to own a pet – and make sure that your new home will allow you to live how you want to.

7.     Your lifestyle in three to five years

But remember that a property is a long-term investment. If you’re thinking of having a baby, or more children, or beginning to work from home, or moving jobs, make sure that you’ve thought about whether your new home will support all your near-future plans as well.

8.     Nice-to-haves and must-haves

Make yourself a list of the things you’d like your home to have and the things you feel that your new home must have. Compare every property you’re considering against this list to make sure that you’re being objective about your real needs.

9.     Your appetite for renovation

One way to get an affordable home in a better area is to go for the old fix-me-upper. This is all well and good if you have the budget and the willingness to fix it up. But if you’re not that sort of person, don’t get stuck with a crumbling property that you have no real way of improving. Rather consider another location or a smaller property with fewer features.

10.  Additional expenses

As soon as you buy a home, you’ll find that you have to deal with all sorts of “hidden” expenses. Remember that you’ll probably want to paint the walls, plant some flowers, buy furniture and appliances, hire a mover, hire a gardener and contract a security company.

Also look at the average electricity and water costs for the area – remember that the bigger a house and the more add-ons like pools and electric fences it has, the more you’ll spend on electricity and water. You will also pay different rates in line with the council’s valuation of the property, so make sure to find out exactly what this is.

If the realistic expenses of living in a home seem unaffordable, then relook at your purchasing price range, and buy a property that leaves you with a little extra disposable income for all this.

Good luck, and happy hunting. 

ooba

Understanding Sectional Title Properties

Understanding Sectional Title Properties If you’re house hunting, and you’re considering buying an apartment or unit in a complex, chances are  you’ll be buying a sectional title, rather than a freehold property. “It’s important to understand the obligations that come with a sectional title, so that you factor these  in to your budget and planning,” says Fanie de Lange, Non-Metro Sales Manager at ooba, South Africa’s  biggest bond originator.  A freehold is a free-standing property. The owner is entirely responsible for its upkeep and can make  any decisions about what to do with it. A sectional title scheme is governed by the Section Title Act,  and allows for a number of people to own parts of a single property – like a block of flats. “Obviously, when you own an apartment, your responsibility for the property doesn’t begin and end at  your front door,” says De Lange. “The parking garage, communal gardens, walkways, security, building  exterior and many other elements are the joint responsibility of all the owners.” With this responsibility naturally come obligations. The interests of the members of the sectional title  scheme will be represented by a body corporate, which will have an established list of rules and  regulations governing things from pet ownership and noise levels to maintenance requirements and the  monthly levy. “Familiarise yourself with the rules and regulations before making an offer to purchase, because you  might find that some are in conflict with your lifestyle or that the financial obligations are beyond your  budget as a new homeowner,” says De Lange. “Remember that you are legally bound to honour the  requirements of the sectional title.” In addition to budgeting for the monthly levy, you should also be aware that many sectional titles’  regulations allow for a special levy to be charged if there is a need for renovations to the building  that falls outside of normal maintenance. “Make sure that if there is such an allowance, you would be able to afford it, and it’s also worth  comparing the levy on the property you are interested in to others of the same value and with similar shared areas, so that you have a good understanding of what you’re budgeting for,” says De Lange.  “You can also ask to speak to the head of the body corporate to find out if there are any planned   special levies in the near future, and check the financials to make sure that the body corporate is  being effectively managed.” While sectional title adds another level of complexity to property ownership, it also adds a degree  of reassurance. While you will be paying your levy every month, you will also benefit from the  maintenance of common areas and exteriors – all of which would be your responsibility if you  purchased a freehold. The actual purchasing process is like any other. “Your bond will be registered as a sectional title  bond, and the registration and transfer all take place in much the same way,” explains De Lange.  “Once you’ve moved in, if you want to be involved in the decisions that are made about your  property, it’s a good idea to get involved in the body corporate.” ooba has experienced experts who will assist you in obtaining the best finance to purchase your  property, whether it is a freehold or a sectional title, and will help you to understand the obligations and requirements. OOBA

IN THE MARKETS: Plan to sell Ellerines shows how consumers battle

THE announcement that African Bank Investments Limited (Abil) plans to sell furniture business Ellerines raises several questions about the outlook for low-end retailers, the most pertinent of these being: if Abil couldn’t find a way to improve the ailing retailer’s book and turn the company around, who can?

In the statement released by the bank on Monday, the Abil board is of the view that the group has implemented most of the strategic initiatives with regard to the Ellerines acquisition, and as such is more than happy to dispose of an asset that has as yet failed to provide any meaningful contribution to the group. While at face value this may seem to make sense, one can only wonder which "strategic initiatives" were planned for the company when Abil acquired it in 2009 for the princely sum of R9.1bn.

Four years seem like a remarkably short time in which to reap the full benefits of the extensive restructuring process embarked on when Abil took over. This involved firing about 2,000 staff, closing and rationalising branches, as well as upgrades and capital investments to the tune of R1bn, including the hi-tech white elephant of a warehouse in Boksburg.

Aside from achieving their "strategic initiatives", the bank also said that a stand-alone, product-based retail business such as Ellerines failed to meet the strategic requirements of Abil’s risk-based financial services business model.

Given the short time since Ellerines was purchased, this indicates a marked shift in strategy over the past four years. More to the point, if retail has fallen out of favour, one has to ask what will become of the other stand-alone retailers in the stable, such as Furniture City, Dial-a-Bed, and Wetherleys?

Of even more interest was the way the sale was presented as an almost routine decision.

In its statement, the bank said the sale was part of a plan to "accelerate" the disposal of the furniture retail business.

This is particularly curious considering that Abil had never before indicated that it wished to sell Ellerines or any of the others.

Abil CEO Leon Kirkinis has always said that he is good with the things he knows — such as unsecured lending — and has in the past resisted ventures away from his core strength, such as transforming Abil into a fully fledged bank.

For this reason, one can only assume that the decision to move into furniture retail was underpinned by a very confident outlook that conditions in the retail sector were going to improve, or at least stay the same.

For someone like Kirkinis to spread his wings into unfamiliar territory only to sell up shop four years later suggests that something went horribly wrong.

By the looks of it, the horribly wrong thing mostly has to do with the increasingly precarious position of the consumer.

At the time of the acquisition, the group said it had "the necessary skills and experience … to reposition the business for substantial future profitability and growth as a pure retailer".

Since then it seems things have spiralled out of control.

The slowdown in retail over the past three months is nowhere more apparent than in the furniture business. Sales at the retail unit of Abil, dominated by the Ellerines franchise, fell by 13% in months. And last month Moody’s warned that the original Ellerines lending portfolio was deteriorating further.

Although the bank has said it plans to strengthen its balance sheet and raise as much as R4bn in equity, the sale of Ellerines will hardly be a significant contributor. For starters, everyone knows that Abil is on the back foot, and as a result is unlikely to get the price it wants for the sale.

Second, it seems as though Abil intends on keeping the Ellerines book.

So what does the sale say about the outlook for other cash and credit retailers targeting the lower end of the market?

If Cashbuild’s fourth quarter operational update is anything to go by, the outlook is bleak.

Although the cash retailer’s revenue had increased 8%‚ its gross profit margins declined further and were expected to remain under pressure. Cashbuild attributed its lacklustre performance to a "competitive trading environment" which I assume means: there’s less and less money in the system.

Marrying unsecured lending with retail hasn’t worked on the scale Kirkinis hoped, and the last of the bad debt has yet to been seen. But the bigger picture is that the position of the consumer at the lower end is bad and getting worse.

• I owe a great debt to my colleague Maarten Mittner, our banking specialist, who contributed his expertise freely while I was writing this column.

BY BRONWYN NORTJE, 07 AUGUST 2013, 05:50