What to expect of the property market in 2014

On the positive side:
• Despite the rate increase, interest rates are still low and repayments much more affordable than a few years ago.
• The property market seems to be moving in the right direction, with 2 consecutive years of positive average house price growth – 7.1% in 2012 and 6.8% in 2013 as per data released by FNB House Price Index.
• Ooba’s metrics as well as the National Credit Regulator’s data show that lenders have eased their lending criteria. This resulted in an increase in bond approvals. In 2013, Ooba achieved approvals for on average 74.21% of the home loans it processed. One can expect this trend to continue.
• The gap between supply and demand seems to be closing. In 2013, on average, the majority - 52.47% - of homes purchased were by first-time buyers. Figures show that residential building activity slowed in 2013. A number of metropolitan areas which had an oversupply of properties are now experiencing stock shortages. Property prices are likely to be boosted by the higher demand and lower supply.
• A recent Absa report shows that it is currently as much as 37% more expensive to buy a newly-built home than it is to buy a similar pre-owned home. This creates a margin for renovation and modernisation of older homes without overcapitalising.
• There is a steady increase in the number of enquiries by buyers and visitors at show houses.
• It is not unusual to receive multiple offers on a property.
• Although paying 10 - 20% deposit is still preferable, and is rewarded with better interest rate offers, 100% bonds are becoming more common.
On the negative side:
• Affordability will become more and more of an issue as interest rate hikes , the higher price of petrol, and rising food and electricity costs affect disposable income.
• Continued high levels of household debt will still hamper some buyers’ chances of obtaining financing.
• As property prices increase beyond expectation in certain areas, banks’ assessors may find it difficult to ‘find value’. We have already seen this in an instance or two. Buyers may then not be able to obtain 100% or 90% bonds and may have to put down a larger deposit.

Published in: Linprop News


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