AA - April 2021

Authors:  Rhys Dyer
CEO of Ooba
24 April 2021

No deposit? You’re more likely to qualify for a 100% bond than ever before

Low interest rates and pandemic-driven lifestyle trends continue to boost housing demand as bond originator data shows some 61% of approved loans we made without a deposit.

First quarter statistics released by ooba, South African home loan comparison service, show continued robust growth in the residential property sector, despite a year dominated by the Covid-19 pandemic and the ensuing economic fallout.

Appetite for no-deposit loans

“The unprecedented low cost of borrowing coupled with the major banks’ appetite to take on low or no deposit loans have created an ideal buying environment, particularly for first-time buyers” says Rhys Dyer, CEO of ooba. During the first quarter of 2021, ooba successfully obtained home loan finance for 80.7% of its applicants, 61% of whom required a zero-deposit loan. Q1 2021’s approval rate across first-time buyers who required a zero-deposit loan was 79.3%.

“Property ownership is now more accessible to aspirant first-time buyers who previously could only afford to rent. Potentially renters may be able to buy a home at a lower monthly cost than their current rental payment,” adds Dyer.

According to the oobarometer, the Average Purchase Price increased by 13.8% for the first quarter of 2021 (Q1 21) compared to Q1 20. The Average Purchase Price of first-time buyers showed a 15.1% increase for the same period and a 3.5% increase for Q1 2021 compared to Q4 2020.

Turn-around on pre-Covid negative growth slump

In ooba’s commentary in the first quarter of 2020, South Africa had just entered its first hard lockdown. At the time, property prices were experiencing a negative growth slump and the future was uncertain, with estate agencies across the country unable to operate.

Dyer says “The paradox of double-digit property price growth recorded for residential property amidst a global pandemic coupled with the worst global and local economic downturn since the global financial crisis of 2008 is astonishing.”

Quality of life and new ways of working

In the space of a year buyers have substantially changed their criteria for an ideal home. Initial lockdowns forced a major portion of the workforce as well as scholars and students to work or study from home. For a large proportion of the population this has become a semi-permanent or permanent arrangement. Consequently, buyers are prioritising quality of life and new ways of working when purchasing a home.

Properties that feature separate workspaces, reliable internet connectivity and more space for families spending more time at home are in demand. Buyers are finding bigger properties at better value for money in suburbs outside of the main CBD.

Competitively priced homes in sought-after areas are selling quickly

“Areas that were once viewed as potential holiday home destinations are now more sought after as permanent residences as opportunities to work and study remotely while enjoying a better lifestyle have increased. Homes in sought-after areas that are competitively priced are selling relatively quickly, even at the top end,” adds Dyer.

Compared to Q1 of 2020 the Average Approved Bond Size increased by 13.3%, while the Average Approved Bond Size for First-time Homebuyers increased by 14.8%. The average interest rate which ooba achieved in Q1 2021 for its successful home loan applicants was prime less 0.05%, 2 basis points cheaper than Q1 2020’s prime less 0.03%.

READ: A look at SA’s 2021 expected rate hikes and why sellers are ‘dropping asking prices by 10%’

With increased competition amongst the major banks for home loan business, Dyer advises using the services of a free home loan comparison service like ooba when applying for a home loan. “Home loan comparison services offer sound advice and approach all the banks to secure the best deal on the buyer’s behalf,” says Dyer.

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