Banks re-committing to lower cost housing

Ivan Neethling, chairman of the Western Cape branch of the Institute of Estate Agents says in a Institute media release, that he and his colleagues have been encouraged by assurances from certain banks, particularly Nedbank, that they are now keen to get back into the bond market in a bigger way albeit on a 90% loan-to-equity ratio.

From certain Standard Bank comments, says Neethling without elaborating, that it is now clear that the liquidity problems which previously were thought to be holding up bond approvals have not been the chief drivers of credit tightening.

“It would appear that the banks fears have been fuelled by their inability to predict the risks they face in the current economic downturn.

“The banks are acknowledging they put a brake on all bond applications and I think they also recognise that this has slowed down the entire real estate industry to the point where many had given up hope of any sort of recovery this year.

“Any change in the status quo will, therefore, provide much needed relief.”

Neethling said that at this stage it looks as if Nedbank (and others) are strongly favouring salaried employees, particularly those in stable secure corporations and government services and will probably continue to look cautiously at the self-employed sector where, in their opinion, there is a greater risk of business failure.

Neethling emphasised that there is always a time lag before property responds to a change in interest rates, the next quarter would be critical if the market is to see a turnaround in the latter half of this year.

“Those who are now advocating caution in regard to further interest rate drops until later in the year must recognise that our sector is in desperate need of relief and that it takes three to six months for a change in interest rates to be felt in the market. Delaying the rate drop now could see us still in recession by 2010.”

Neethling once again made a special plea to those banks who are reluctant to bond RDP housing on the grounds that they are not able to find value in these homes.

“The banks in finding value must not just focus on fittings, fixtures and condition of these houses but the demand for them, which is greater now than ever before. Keen buyers with good salaries, but with little savings, are eager to pay R45 000 to R90 000 to own such houses. Surely the banks should be encouraging this as a worthwhile first step onto the home owning ladder.

“We must avoid creating the perception that we are once again leaving the poor and marginalised behind as we succumb to the lure of higher profits and less risk in the higher income brackets of our society. Other factors apart, it is now clear that from the international scenario that the risk among higher income earners can be just as real as it is lower down the scale.”
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