Ronell gave us this update of what is happening on the local property market:
The Property and Financial Market
- If we look at The 3rd quarter, Cape Metro FNB Residential Property Barometer, it's pointed to significant jump in activity levels in the region, after a very weak 2nd quarter level.
- This suggests that the region is beginning to feel the positive impact of the series of int. rate cuts that took place in the 1st half of 2009.
- The estimate percentage of properties sold at below asking price, shows a significant decline from91% in the 2nd quarter to 83% in the 3rd quarter.
- The average time of a property on the market prior to it being sold, declined sharply from 22 weeks in the 2nd quarter of this year to 16 weeks in the 3rd quarter.
- People selling to 'down scale' due to financial pressure, has declined significantly from average 36%in the 2nd quarter to 25% in the 3rd.
- Simultaneously, selling in 'order to upgrade', jumped from 9% of the total selling, to 17% over the same period.
- Average selling prices of the Cape Metro area as a whole, is plus/minus R885 000.
- The market improvement is largely the result of (1) int. rate cuts and (2) the banks' responses to better market conditions by relaxing their lending criteria.
- 2 of the 4 Large banks are looking at granting home loans of u to 100%, whilst previously (especially during the 1st half of the year), they were granting on average between 70% - 80% of the selling price.
- We must however take into account that banks are more so starting to rely on built-in credit scoring systems for the assessment of their home loan applications. This essentially means that customers behavior in terms of the way in which they conduct their accounts or credit, are seriously being taken into account when looking at granting them a new or further home loan.
- Further interest rate discount negotiations with the banks on behalf of new home loan applicants,have become difficult and rates below 1% less than prime of 10, 5% is almost non-existent.
- The improvement of the market has not only been seen in volume of transactions and diminishing price deflation, but also in an improvement in credit quality. According to the banks, their home loan arrears numbers have been improving since the beginning of the year.
- Good news is that it looks like the economy is expected to provide more support for the market, as we emerge from recession.
