Credit Act – RE/MAX SA

The implementation of the National Credit Act (NCA) will impact on the South African property industry, most importantly in assisting potential home buyers to choose the most reliable and professional estate agents and bond originators, according to a media release by RE/MAX SA.

South Africa can now look forward to one single Credit Act, which aims to regulate the entire credit market. The NCA replaces both the Usury Act and the Credit Agreement Act, but has a far wider field of application than the combination of these previous Acts. It will be implemented from 1 June this year.

Consumer protection lies at the heart of the Act. It attempts to prevent consumer debt and assist people who get into serious trouble. Before credit can be granted, credit providers have to evaluate a consumer’s credit worthiness and the Act will substantially change these requirements.

Fears have until now been expressed that the Act, which incorporates more stringent requirements in terms of income and expenditure disclosure, could lead to frustration in the residential property industry as a result of bond approvals taking longer than previously.

Says Jeanne van Jaarsveldt, Operations Director of RE/MAX of Southern Africa: “Fortunately, the changes that are required to the system and the processes are not as alarming as may have been projected by the media over the past couple of months.”

He notes that the implementation by the banks of the Act will be closely monitored in conjunction with the main business partners of RE/MAX, including BetterBond.

Van Jaarsveldt says some of the banks envisage little difference in the speed of service delivery as a result of the Act, while others take the view that there will be small issues to solve along the way.

The latest House Price Index released by the Absa Group, which took the effects of the NCA into account, found that the market is still recording good growth.

Nominal year-on-year growth of 15,5% was recorded in house prices in the middle segment of the market in April 2007, according to Absa. The revised growth rate for March was 15,7%. This brought the average price of a house in this segment of the market to about R911 800 in April. In the first four months of the year, nominal house price growth was 15,6% on average compared with the same period last year.

Peter Gilmour, Senior Vice President, Franchise Sales, Brokerage and Future Development of RE/MAX International, says the NCA will bring about more stability to credit provision in South Africa.

“It is refreshing that the major South African banks in the country do not predict a marked decrease in property sales. We feel the market in South Africa is robust enough to incorporate the changes brought about by the NCA without experiencing a serious downturn,” according to Gilmour.

Van Jaarsveldt says the changes under the new Act and “the new requirements for income disclosure could lead to slightly longer approval times for bonds. In our view, this is not going to impact on people’s decision to buy a house.

“Rather, we believe the new act will lead to a better regulation of credit in South Africa and protect the consumer, which is naturally in our interest.

"In the long run, the Act will ensure more confidence in terms of credit provision in South Africa. Having looked at the requirements of the Act, we have little doubt that it was designed to protect the rights of the consumer and force credit institutions to not be reckless in the way they grant credit.

“Ultimately this will lead to more stability in the credit environment and, we think, also in the property market.”
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