Banks must come to the party, says top developer

Cutting interest rates will not help the housing market unless the banks get over their "property panic" and lower their deposit requirements.

So says Keith Nash, sales and marketing director of leading residential developer Sable Homes, who notes: "Even at the current interest rates, there is steady demand for new homes and, more importantly from our point of view, for stands.

"But with the banks now requiring minimum deposits of 25% on purchases of empty land, even creditworthy clients are being shut out of the market and developers are being forced to become bankers in order to get any deals done."

He says that a few years ago, when stands cost an average of R50 000, a deposit of 25% was achievable, but with the average stand price now being around R500 000, the deposit required is R125 000, and that this is not attainable for most buyers, with the result that the "nursery" of the property market - the sector which attracts the most new entrants - has been brought to a virtual standstill.

"What is more the banks' caution in demanding such large deposits is unwarranted. We are not living in the US where the sub-prime lending crisis has caused property values to drop so drastically. In fact the latest figures show that values in SA have declined far less than 10 percent, so a 10 percent deposit would be more than adequate to ensure that there was sufficient value in the property to secure a home loan."

As it is, Nash says, there are many developers going out of business because they cannot sell their stands - not for lack of potential buyers but because those buyers cannot access finance. "And then, when the banks which have granted the development bonds for those projects have to take them over, they are only asking for 10% deposits in order to get the stands sold as fast as possible and off their repossession books."

Meanwhile, there does not seem to be any consideration by the banks of the massive ripple effect that a slowdown in the housing market has on the overall economy. "When a development fails or is put on hold, it affects literally thousands of people downstream, from sales agents and conveyancers through architects, builders, designers and retailers right down to the workers that make bricks and build appliances and furniture.

"In fact, if the banks do not lend or make it impossible for potential buyers to access finance, their fear that values will fall is likely to become a self-fulfilling prophecy. They will effectively put people out of work and those without jobs will not be in the market to buy homes or land. Demand that is still strong now will dry up and then prices really will come down.

"And we believe we are currently in real danger of falling into such a downward spiral so we are appealing to the banks urgently and negotiating with them to get them to lower their deposit requirements without delay."


Loading comments
More news articles
Guidelines to securing a home loan
29 May 2018
Many young South Africans are working hard to achieve their dream of purchasing their first home. However, the process can be challenging due to the daunting application process, which can take up to 2 years and is often enough to discourage prospective buyers.
read more
Things you should consider before upgrading to a new home
23 Apr 2018
The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
read more
Get pre-qualified
Make offers with confidence knowing what you can afford. Then shop for the best home loan
Bond Calculator
Calculate the estimated repayments on a home loan and savings with extra payments