Latest consumer credit data - home ownership situation could improve

Estate agency principals, says Bill Rawson, Chairman of the Rawson Property Group, tend to consult different authorities when looking ahead and mapping out the future of their organisations.  Most, however, agree that among the more important data they consult will always be the South African consumers’ credit status.

In recent years Rawson has been one of those who has regularly called for South African consumers to adopt more responsible, less instant gratification spending habits.  Now, he says, the latest July FNB Consumer Banking Barometer has come up with evidence that the South African consumer is adopting a less impetuous, more long term and considered approach to his finances – and this , says Rawson, augers well for the South African housing sector.

The FNB report, says Rawson, shows that South African household debt in relation to income (which many analysts think is the most significant of all consumer data regarding housing) has improved by some 10% recently.  Having peaked at 88,8% in early 2008 (an all time high), it is now down to 78,4%.

For this, says Rawson, we can thank the National Credit Act and the low interest rates, but South African consumers have also, he believes, played a part by at last adapting to current economic circumstances, which on the whole have been difficult and are unlikely to improve soon.

Other FNB data giving reasons for a new confidence in the South African consumer and his ability to become a home owner are, says Rawson:

- A decline in insolvencies by 5,7%, down to 230 per month, in comparison to the 451 per month figure recorded in the first five months of 2009 – a massive improvement.
- Downscaling on homes due to financial pressures is down to 13% of the total number of sellers, as compared to a high of 34% in 2009.
- Tenants ‘in good standing’ now comprise 86% of the total in South Africa, whereas in 2009 they amounted to only 71%.

The improved situation, says Rawson, has led FNB to say that the South African consumer is now less vulnerable and in a more healthy position and it has also made it possible for credit to consumers to grow year-on-year by 3,5%.  This figure, although by no means spectacular and definitely not a herald of another phase of prosperity, has at least put the South African consumer in a ‘sensible’ situation when compared to the irrational over-borrowing that was countenanced in the 2010 to 2013 era.  During that time annual credit growth peaked at 24,6%.  FNB, says Rawson, now predict that credit will continue at 3 to 4%, i.e. below the inflation rate and therefore in line with the austerity measures that South Africa now has to adopt.

So far, so good – but are there any signs that in the tight financial circumstances faced by most consumers today they will adopt the traditional South African middle class mindset and make buying and investing in a home their number one priority?

The FNB figures, says Rawson, show that mortgage credit is still not one of the main drivers of borrowing as it always should be.  The latest year-on-year figures show that non-mortgage credit rose by 4,6%, but mortgage lending increased by only 2,8%.  In this scenario stock shortages will continue, an unsatisfactory high percentage of South Africans will carry on renting rather than buying their homes and existing homes (or affordable well priced new developments) in the high demand areas will continue to appreciate in value way ahead of the national average.

“We can be grateful,” says Rawson, “that the South African consumer, due at least in part to his adopting a less reckless attitude to borrowing, is in a slightly better position now to become a home owner and provided the global economy does not deliver any nasty shocks in the next year we can look forward to further stabilization in the housing market, which although not performing spectacularly is making slow progress.”

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