Yes, it’s a BIG title, because it’s BIG news and many people are talking about it. 61.2% of all home loan application were turned down in February 2009. This lies a heavy burden on the housing market which seems to be in recession and that’s what we’ll discuss today.


Firstly I’ve included the graph to indicate what we might expect and what has happened in the past. The Great depression is shown in light gray, our current recession is shown in blue. We need to note that South Africa lags America by at least 6 months to a year meaning that we’re only about 9 months in our recession cycle. The fact that we lag America was used to our advantage as we could introduce precautions such as the NCA.

Banks have tightened their lending criteria more and more over the past 12 months, putting the housing market under increased pressure. Banks are demanding higher deposits with the average deposit as a percentage of the purchase being 24.1% or R200 000. Gavin Opperman, group managing executive of ABSA banks Securitised loans in the retail devision says ABSA will not be relaxing its home loan criteria before the end of 2009.

The impact on the residential property market is substantial. John Loos, property analyst for FNB home loan division reckons that even though the housing market is under pressure from the national credit act and stricter lending criteria from banks, interest rate cuts could kick start the market later. This is the only trump card South Africa has because there is still room to drop interest rates. Should rate cuts not occur, the South African housing market could find itself in a similar position to that of overseas markets where house prices have fallen by 17% in the United Kingdom (in one year) and even more in the US. The average house in the UK has fallen by £34 626,00 in the year to February 2009. The latest house price indices show that South African house prices fell by 6.9% in the year to February 2009. Johan Loos predicts that house prices could drop by up to 10% this year but reiterates the prospect of the market picking up early next year as the positive effects of lower interest rates take effect.

We’d love to hear your take on the issue at hand in the comments below!

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