The National Credit Act is still the chief factor limiting residential property sales, but matters are improving, say the experts.

The recent half-percent drop in the interest rates, though welcome, is not as significant a boost to the residential market as might be expected, says Lanice Steward, MD of Anne Porter Knight Frank.

“We have to take into account the rises in rates, electricity costs and fuel prices all of which together will nullify the 0.5 percent reduction.

“At the same time, we can be grateful for it, because in a sense it keeps home buyers on roughly the same budget as they had previously, despite these other increased costs.”

The chief limiting factor to growth in the residential property sector, says Steward, is still the National Credit Act and the stringent criteria it has caused the banks to impose.

Nevertheless, says Steward, even here there is some good news.

“The latest stats shows that the size of bonds in February 2010 was 13.9 percent up on those of February 2009.

“This has come about partly because property has slightly increased in value (the average South African home sold at R807 042 in February 2009 but the latest figure is R895 031), but also because the banks are now more willing than previously to accept smaller deposits.”

She says there has been a marked increase (29 percent) in the number of 100 percent bonds issued. In August 2009 only 18 percent of applications for 100 percent bonds were approved but the figure is now 32 percent. Also, 100 percent bonds now form 47 percent of the total money loaned, which is a very high proportion.

“The gradual easing up on the National Credit Act criteria, especially for those needing 100 percent bonds, is having an effect on the whole property market.

“But we are still in a tough borrowing phase – before introduction of the NCA only 8 percent of bond applicants failed to fulfil the bank’s credit criteria.

“Now the figure is 14 percent,” says Steward.

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