More home loans granted as buyers forge ahead

Consumers continue to demonstrate confidence in the residential property market, despite mounting affordability constraints.

He says: "Our latest statistics show that the number of home loan applications being submitted by prospective buyers has increased by 4 percent in the past 12 months, in line with the continued increase in housing demand," says Shaun Rademeyer of BetterLife Home Loans.

In addition, he says, there has been a sharp decline in the number of applications being declined by the banks, with the net result being an increase of almost 2 percent in the number of home loans approved in the 12 months to the end of June.

"This confirms that there are more prospective buyers in the market, and a bigger number are financially qualified to buy, which is quite remarkable given the food, tax, transport and utility cost increases that have affected many household budgets over the past year."

Further analysis, Rademeyer says, shows that repeat buyers were in the majority over the past 12 months, accounting for 53 percent of home loan applications and 67 percent of home loan approvals.

"The fact that these buyers often have equity in an existing property that they can use as a deposit gives them the edge in obtaining bond approval, and many who are 55 and over are now also downsizing, which means they usually also need smaller loans.

"Still, the fact that the majority continue to re-invest their equity in property rather than buy other assets is, we think, a strong vote of confidence in the real estate market that we hope will not be undermined by the latest interest rate increase by the Monetary Policy Committee."

He says the longer the Reserve Bank is able to hold interest rates steady, as the Federal Reserve is still doing in the US, the better it will be for prospective first-time buyers, too.

The BetterLife statistics, which represent 25 percent of all residential mortgage bonds being registered in the Deeds Office, show that in the 12 months to the end of June, the average percentage of home purchase price that first-time buyers were required to pay as a deposit dropped from 8.7 percent to 7.5 percent.

"At the same time," says Rademeyer, "the rate at which the average purchase price in this sector of the market grows slowed from 7.5 percent to 1.4 percent, so the actual average cash amount required as a deposit declined."

Meanwhile, he says, home sellers need to bear in mind that the growing trend towards downsizing among repeat buyers has also caused the rate of price growth in this sector of the market to slow down.

"Our stats show that in the past 12 months the average home price has increased by only 4 percent, compared to almost 11 percent in the previous 12 months. "