Banks oozing confidence in property market

Ed Grondel
Homebuyers should have little fear of their home loan application being turned down and should be confident of even being awarded favourable lending rates, providing of course they meet the banks’ lending criteria and sufficient value is found in the property, according to an article in the March 19 Sunday Tribune Property Guide.

Media commentary from the four major banks appears to ooze lending confidence in the current property market. Spurred on by the Government’s recent scrapping of transfer duty up to R500 000 and the peaceful passage of the local elections which sent nervous shudders through the property market a decade ago but was barely noticed this time round.
Certainly, all the big four banks’ confidence is on record with Absa and Standard Bank forecasting double-digit growth in house prices this year and Absa projecting a 12 percent increase over that of 2004. Their forecast follows an increase of 14,5% in nominal house price growth in February over that of the same month last year.

The recent announcement in the Budget on significantly lower transfer duty on property is expected by Absa to prompt higher levels of activity in both the residential and commercial property markets over the next few months and this view is well supported by estate agents and mortgage originators. Demand for housing by lower- and middle-income groups is also forecast by Absa to be stronger than would otherwise have been the case, which will put upward pressure on house prices in the short term.

Standard Bank, while acknowledging the continued buoyancy in the market, notes in its most recent research that the growth in house prices has softened substantially from last year’s peak.

And despite the 121% rise in house prices over the past five years, houses, the bank says, generally remain relatively affordable and accessible. “Assuming constant interest rates and nominal income growth of close to 10% this year, combined with the impact of reduced transfer duties, house prices are expected to again record double-digit growth rates.

Ed Grondel, chief executive of FNB Homeloans’ is extremely positive of property prospects for the year, believing the recent transfer duty adjustments have opened up much needed opportunities for first time buyers.

Nedbank has also weighed in with equally positive views with particular focus on Durban. Richard Thomas, divisional director Nedbank Corporate Property Finance KZN, told a March 7 media briefing in Durban that he believed Durban’s maturing market was “alive with opportunities.” This applied to all aspects of property including residential, commercial, industrial and retail.

The bank’s strong faith in the region is reflected in its current financing of one in every three applications for finance. Thomas says the existing levels of planning and development for Durban indicate a strong property and development market for the region. In the past two years, Durban has seen some R2,4 billion worth of development announced at the planning state of which some R2,16 billion or 90 percent has been initiated.

Nedbank’s KZN division has financed more than R1 billion of new residential projects. These include the Quays and Quayside at The Point, the Pearls in Umhlanga and Morningside Ridge.

Thomas says although investor appetite has waned in the upper end of the market, opportunity still exists in the pricing segment of above and below R1 million. The bank’s most recent financing is a 300-unit project on the old Mowatt Park site in Montclair, which is still under conceptualisation with construction set to begin early next year. Priced between R300 000 and R700 000 the project will introduce some relief in this increasingly under-supplied price grouping.
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