Last leaky one I had, it was coming out of the steering shaft going into the box, but it didnt make the system 'spongy', in hydraulics .. thats a sign of air in the system, or the wrong type of oil (less likely).. there is a bleed proceedure to expell all the air, most open circuit systems do it automatically, but I have learned that outboard systems need to be purged of air to work properly . It involves cycling the steering fully one way and draining the excess, then back the other and repeating the process, then topping up the reservoir.
If that doesnt work then either the helm pump isnt generating enough pressure or your steering ram is allowing oil to bypass in the steering cylinder meaning the actuating pump(helm) needs more revolutions to effect the same amount of steerage