Signs of an improvement in the demand for homes

There are small but significant signs that the outlook for the residential property market is improving, says Mike van Alphen, National Manager of Rawson Finance, the bond origination division of the Rawson Property Group.

The latest report from Jacques du Toit, property analyst for Absa Home Loans, says van Alphen, gives a very clear signpost: du Toit reports that year-on-year at the end of August, growth in private sector mortgage balances (both commercial and residential) was 2,1% up (as against a figure of 1,8% at the end of July).

Growth in the value of outstanding mortgage balances remained unchanged at 2,7% year-on-year – with household mortgage balances now running at 60% of the total household debt.

Du Toit’s prediction, says van Alphen, is that household credit growth will remain in single digit figures for at least the remainder of this year and possibly well into 2014. However, by international standards a growth of 7 to 9% is still satisfactory.

The Absa figures quoted, says van Alphen, are, in fact, encouraging because they show that the reckless borrowing and spending has now largely ceased – the debt increases recorded are not excessive. The big hope for the future, he says, is that mortgages will now increasingly form a larger share of household debt and that the expenditure on non-durable household ‘goods’ will continue to reduce.

“As I have indicated in previous press statements, there are signs that this is happening,” says van Alphen. “We have to recognize however that this involves an educational effort. Here at Rawson Finance we have time and again shown that in helping clients to reduce their hire purchase and ancillary expenditure on non-essential items we have been able to help them qualify for home mortgages that they often thought were beyond their ability to handle.

“South Africans in previous eras,” says van Alphen, “were known for their willingness to live simply, to drive small cars and to avoid expensive outlays on furniture, clothes and holidays. That mindset needs to be re-assimilated.” 

“The emphasis should, as far as possible, always be on securing the one durable appreciating asset open to the average man-in-the-street investor, i.e. the home. No one who has had to undergo austerity so as to secure a home (as most of us of the older generation did) ever regrets the course he took later in life.”

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