Questions around the impact of the COVID-19 lockdown on the residential property sector have been rife – and with good reason as property is a sector that contributes significantly to the GDP. More than that, property is inextricably linked to accommodation and shelter, one of our most fundamental needs. Both buyers and sellers are concerned about whether they will be able to transact in the coming months, while buyers in particular are asking questions about the stance banks are likely to take around lending money for home loans.
It’s useful to consider the broader context, before addressing the question of home loans specifically. Even before Covid-19 and lockdown the market conditions were that of a buyer’s market in which supply outweighs demand, giving buyers both more options and more room for price negotiation. All conditions suggest that a buyer’s market is likely to remain the status quo, which helps those looking to buy. The lower interest rate – the lowest it’s been in 47 years – also goes a long way in making property investments more affordable and more attractive to potential buyers. Add the fact that the threshold on transfer duty was raised to R1 million earlier this year and that the price of property in general is likely to come down somewhat as a result of the overall strain on the economy. All of this makes the outlook rather positive for those who can afford to buy at this time.
While always important, affordability is set to be an even more pertinent consideration going forward and buyers are therefore advised to keep all accounts in good standing and save as much as possible for a deposit.
At this stage it is unknown exactly how banks will respond to home loan applications after lockdown, but there is a strong likelihood that it will be with caution and that the qualifying criteria will be more stringent.
While the economic recovery from lockdown is likely to be slow, it’s important that the banks continue lending money in a responsible manner as a means of stimulating the property sector. Whatever the economic situation, people still need accommodation, which means there will be buyers and sellers looking to finance these transactions.
Having said that, it seems unlikely that banks will grant 100% home loans as readily as in the past and, because the cost of funding loans will be more expensive, this could potentially also result in lower interest rate concessions than we have seen in recent months. Furthermore, banks may potentially re-price their future offers, as well as re-assess approvals in cases where the applicant’s circumstances have changed, such as when someone’s salary is reduced owing to business slowing down.
In the coming months we’ll see a situation where buyers are in a very favourable position to purchase property but, with lending criteria set to be more stringent, it’s a good idea to work with a bond originator who has the experience and expertise to help ensure buyers get the best deal possible. At BetterBond, for example, consultants are expertly versed in the requirements of the various banks and what their different home loan products offer, which means we can easily tailor an individual application such that it has the very best chance of being approved and thus increasing the likelihood of obtaining the home loan.
Anne-Marie Bamber is Norgarb Properties dedicated Home Loans Consultant. She has over 15 years’ experience in assisting clients with their Home Loan needs and has placed many happy families in their dream homes.
Contact her today for no cost stress-free home-buying.
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Tel: +27 (0)21 851 3568 | Fax: +27 (0)21 441 1494 | Cell: +27 (0)82 071 1665