Continued pressures on qualifying for home loans

Continued tight mortgage lending, high household debt and slow economic growth are constricting sales volumes says Seeff chairman, Samuel Seeff. Our agents report that demand for residential property is up this year, show day attendance and advertising response is up by about 20% and more people are willing to buy, but many would-be buyers are still having difficulty qualifying for home loans.

While the low interest rate seems to have spurred a willingness to buy, especially in sub R1,5 million market, about 67% of home buyers are reliant on mortgage finance. Sales volumes are a function of lending and while the demand is there, it is not filtering through to the market in terms of the banks' propensity to grant home loans, he says.

At the height of the market (between 2004 and 2007), it was not unusual to see monthly transaction volumes in the upper thirty and forty thousands, says Seeff. This slumped by more than 50% to under 16,500 in 2009 and has since improved by 20% to around 20,000 transfers per month. By contrast, the number of bonds registered annually since 2009 remains at about half of what it was during the peak. We would have liked to have seen a corresponding improvement in home loan approvals by now, he adds.

For the market to normalise, Seeff believes that monthly transaction volumes should be at between 25,000 and 30,000 transfers per month.

With house prices remaining relatively flat, not only buyers, but the banks too should be encouraged to find real value in the market right now. There is security in bricks and mortar, especially now that homes are more correctly valued. Seeff believes that this, together with the continued deposit requirements, should serve as encouragement for the banks.

Home ownership creates security, stability and a strong economic foundation, yet only 58,1% (according to Statistics SA General Household Survey, 2010) of South Africans own their own homes; only 5% more than in 2002. By contrast, home ownership in Brazil has grown to about 75% in just ten years. One of the aspects to encourage home ownership, was a lengthening of the loan repayment period to 30 years from the norm of 20 years. However, the greatest factor has been strong economic growth over a sustained period while ours appears to be petering out in relation to other African countries.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Feb 2018
      Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Feb 2018
      The suburb of Greenstone in Johannesburg east came to be over the last two decades. “In the beginning, it was literally just a hill with not so much as a shopping centre,” says Michael Levy, Property Consultant at Jawitz Properties Bedfordview. Today it has plenty shopping facilities and is fully built, boasting high-density, upmarket housing and residential estates, though still has a few pockets poised for commercial development.
    • 20 Feb 2018
      A major shift in the ageing paradigm has precipitated an equally dramatic transformation in the retirement sector, with modern accommodation options worlds away from the conventional model.
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us