Con­sumers come un­der pres­sure with ris­ing house prices

Weekend Argus (Saturday Edition) - - PROPERTY -

AC­CORD­ING to the lat­est sta­tis­tics re­leased by mort­gage orig­i­na­tor Bet­terLife Home Loans, the na­tional av­er­age home price has risen by al­most 8 per­cent in the year to the end of June, com­pared with 5.9 per­cent in the pre­vi­ous 12 months.

How­ever the sta­tis­tics also show that the rate of home price growth is slow­ing, hav­ing achieved an in­crease of just 2 per­cent in the June quar­ter, com­pared with an in­crease of al­most 5 per­cent in the first quar­ter of this year.

“This shows once again the damp­en­ing ef­fect that high cost of liv­ing in­creases have on the prop­erty mar­ket,” says Bet­terLife Home Loans chief ex­ec­u­tive, Shaun Rade­meyer.

“This year, there has not been much ex­tra in­come in­jected into house­hold bud­gets by way of salary in­creases, a large drop in fuel prices like the one that oc­curred last year or the per­sonal tax cuts usu­ally an­nounced in the Bud­get.

“And what has come in has been rapidly ab­sorbed, in most cases, by steep food price in­creases re­sult­ing from the on­go­ing drought in many parts of the coun­try and ris­ing wa­ter and elec­tric­ity costs.

“Mean­while the av­er­age house­hold is al­ready deal­ing with higher debt re­pay­ments thanks to the two in­ter­est rate in­creases an­nounced this year, and the an­nual in­creases in wa­ter and elec­tric­ity tar­iffs just an­nounced by most mu­nic­i­pal­i­ties, which av­er­age around 10 per­cent.

“In short, most con­sumers are strug­gling to make ends meet, and while the de­mand for prop­erty re­mains high, the de­cline in dis­cre­tionary in­comes is in­creas­ingly lim­it­ing what po­ten­tial buy­ers are able to af­ford – and what banks are pre­pared to lend them.”

Rade­meyer says that the banks are, how­ever, still favour­ing se­cured lend­ing prod­ucts such as home loans, and that the per­cent­age of home loan ap­pli­ca­tions be­ing de­clined out­right has dropped to 27 per­cent in the past year from 28 per­cent in the pre­vi­ous 12 months.

Mean­while, he says, con­sumers are plac­ing larger de­posits on their home pur­chases, pos­si­bly due to the favourable in­ter­est rates they re­ceive when do­ing so.

In the first-time-buyer sec­tor of the mar­ket, con­tin­ued strong de­mand is in­di­cated by a 6.2 per­cent in­crease in the av­er­age home price in the year to the end of June, com­pared to a 3.8 per­cent in­crease in the pre­vi­ous 12 months, he says.

“In ad­di­tion, first- time- buy­ers con­tinue to ac­count for 46 per­cent of all home loan ap­pli­ca­tions, and al­most a third of all home loan ap­provals, even though this sec­tor has also seen cash de­posit re­quire­ments rise.

“Our ex­pec­ta­tion, though, is that it is go­ing to be­come in­creas­ingly tough for prospec­tive buy­ers at all lev­els to se­cure home loans, and in­creas­ingly ad­vis­able for them to ap­ply through rep­utable mort­gage orig­i­na­tors who can pre­pare, mo­ti­vate and man­age their ap­pli­ca­tions to en­sure a chance of suc­cess.

“As things stand, those who ap­ply on their own only have a 35 per­cent chance that their ap­pli­ca­tion will be ap­proved, while we are still able to se­cure ap­provals for three out of ev­ery four ap­pli­ca­tions that we sub­mit.”

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