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Home loan applications rose 36% in Q4 y/y – ooba

Bond originator ooba head of sales Careen Mckinon notes ‘we’ve definitely seen a shift from tenants to homebuyers’.

NOMPU SIZIBA: It’s been nearly a year that South Africa has lived under pandemic conditions, and home loan players ooba Home Loans say they’ve noted marked changes in consumer behaviour and lending trends during the period. The company released its fourth-quarter home loans application data, which shows brisk demand in the period.

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Well, to unpack their report and to share their outlook on the property sector, I’m joined on the line by Careen Mckinon, head of sales at ooba Home Loans. Thank you so much, Careen, for joining us. Now, your Q4 2020 home loans application report shows quite a leap in applications relative to Q4 of 2019. Up some 36% – quite a jump. What do you deduce from this data?

CAREEN MCKINON: Thank you, Nompu. We’ve seen a surprising boom in the local residential property market. What we have seen is that, due to the current low interest-rate environment, as well as the competitive home-loan deals from the banks, this has created an ideal buying environment for first-time home buyers. So we’ve seen much of the activity in the market currently driven by first-time home buyers.

NOMPU SIZIBA: So what’s the common price range of properties where you see the most activity and applications for home loans?

CAREEN MCKINON: On a national basis, it’s anything between R500 000 and about R2 million where we’ve  seen most of the activity.

NOMPU SIZIBA: In your report did you see any trend shifts in the way that banks approved loans? After all, job security remains very fragile these days, and businesses are also very fragile. So have you seen any shifts in their attitude towards agreeing to 100% loans, for example?

CAREEN MCKINON: At the moment we haven’t. We haven’t seen any pullback or tightening of the banks lending criteria. And that’s certainly reflected in our January numbers as well. We’ve come out of the pandemic which hit us last year and, from June onwards, we’ve seen a huge increase in our conversion numbers in terms of the banks’ lending appetite. And what we’re are seeing is that about 60% of our applications are from first-time home buyers, and about 80% of those applications are actually being approved – which is a really good indication that banks’ lending, and appetite for lending, is very, very aggressive at the moment .

NOMPU SIZIBA: Of course, it’s prudent for you as the consumer, the home buyer, the flat buyer, to minimise your debt because it’s it will hang over your neck for many, many years. So to what extent are you seeing home buyers or property buyers putting down a deposit, a substantial one, so that they can bring down their debt repayments?

CAREEN MCKINON: We’ve actually seen the size of the deposit has actually decreased. So deposits have come down. The average deposit was down 16.3% compared to quarter ’19, last year. But that again is an indication that the banks are prepared to consider a 100% loan. So the more aggressive the banks are in terms of blending, the lower the percentage of the deposit.

NOMPU SIZIBA: What are you seeing in terms of the luxury market? We have heard that’s been quite a tough one in terms of activity because obviously the price tag is that much higher.

CAREEN MCKINON: Yes. That’s definitely what we have experienced. The slow economic growth, coupled with some challenges around market confidence, is definitely impacting the luxury and the high-end property market. Our expectation for the next couple of months is that this particular segment of the market will remain subdued and the activity will continue in the mid-size property price ranges.

NOMPU SIZIBA: And then, from your perspective in terms of doing business with clients and so on, how has that changed for you since the pandemic began?

CAREEN MCKINON: The property market, as we’ve seen, has definitely had a boom. So we’ve obviously seen a huge impact and an increase in our numbers, which has been sort of unbelievable when you think many industries are being impacted so severely. So, for the property market and home loans specifically, we’ve seen our volumes increase in terms of the quarter ‘19 versus quarter ‘20 – as you mentioned, 36% in terms of volume and 56% in value growth last year versus this year. So it really has been a big uptick for us.

NOMPU SIZIBA: Just on the issue of making sure that you’re granting the right clients loans through the banks – because obviously you’re a conduit, you’re a facilitator for the banks to grant loans to people – how do you ensure that you’ve got the right clients for the banks, or is it something that the banks assess for themselves?

CAREEN MCKINON: For us it’s to make sure that we can shop around for the home buyer, so we can make sure that we are assisting the home buyer to get the best possible deal that is available when they require finance. What we’ve seen is that, if a client goes to their own bank, the statistics show us that about 59.7% of those applications are approved if your client goes to a single bank, where if you are using the company ooba and the home-loan comparison service, our approval rate at the moment is just over 80%. So there’s definitely a benefit to the consumer in making sure that they can get the deal. And if one bank declines, they have alternative options.

NOMPU SIZIBA: Of course, we’ve been reflecting on the results that came out of your Q4 report. January is nearly over. What’s the feeling or what’s the market activity like? Are you seeing an increase in activity in terms of home-loan applications relative to what you saw in January last year?

CAREEN MCKINON: Yes, we have. We have seen an uptick in terms of the volume and …… is one of the values. Some of the provinces were a bit slower to get going in January than others. But we’ve definitely seen an uptick in terms of the number of applications.

NOMPU SIZIBA: And to what extent – I think you did touch on it earlier – do you feel that it’s the interest-rate environment which has also driven people to go for it?

CAREEN MCKINON: That’s had a huge impact. The rates have been the lowest they’ve been for more than 50 years. And, if you look at the market that’s looking to rent, in some instances now it’s cheaper for a tenant to actually purchase a property and pay the home loan as opposed to the rental. So we’ve definitely seen a shift from tenants to homebuyers.

NOMPU SIZIBA: Not good news for the landlords of properties. And of course, for the rest of the year, what’s your anticipation? What does your crystal ball tell you? We do expect interest rates to remain low for quite some time, although the Reserve Bank did hint in its a quarterly projection models that perhaps interest rates could go up later in the year. But, assuming that they don’t, do you see that there’s going to be continued demand for property and that your business is going to benefit?

CAREEN MCKINON: We do. We do sort of predict, as you say, with our little crystal ball – if we can look into it – that the property market will continue to show really strongly levels of activity. And as long as the rates are as low they are, then we should still be seeing that. Whether there will be an impact carried over from last year in terms of the economic crisis remains to be seen.

NOMPU SIZIBA: Careen, thank you so much for your time. That was Careen Mckinon, the head of sales at ooba home loans.

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