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.

Estate agents blame banks for lack of home loans

Estate agents are still struggling to secure loans for house buyers and say that in spite of banks offering 100 percent bonds, many financial institutions are not delivering on their promise.

Pat Acutt, the chairman of Acutts, said while the major banks offered 100 percent finance, the qualifying criteria were “very stringent”.

“You need to have a very, very good credit record to get a 100 percent loan. The banks have not relaxed their requirements in terms of the supporting documentation needed to access the application, and this on its own is making it difficult, especially for self-employed clients to qualify for a loan.” Acutt said the heavy reliance on credit checks jeopardised clients because in some cases information was outdated. “Gone are the days that the banks look at equity or net asset value, it is all about affordability.”

Dina Soukop from Soukops said banks were refusing too many applications, “in some cases A-list clients”. “Our experience has been that applications go through a certain process and if a box is not ticked then there is no human intervention and the bond is automatically rejected. That is why we prefer to use mortgage originators as we can at least talk to someone.”

Carol Reynolds, area principal for Pam Golding Properties Durban North, said the National Credit Act had proved an excellent buffer to the global credit crunch. “But legislation only comes alive via the manner in which it is interpreted and applied. There is a sense that the banks are adopting a very strict view, which is hampering the lending climate. “The spirit is one of caution and we are still seeing a high decline rate on our bond applications (about 50 percent). There is a lot of interrogation and inconsistency, which always calls underlying motives into question: are the banks operating from a strict risk-reduction mentality, or are they assessing each case on its merits?”

Mike Bennett from Proprop said: “I was told by a senior banker that banks would rather invest their money in China than risk it giving home loans in South Africa. The only reason they are staying in the business is so they don’t lose their clients to the opposition.”

Brenda Liversage, general manager of Maxprop Residential said: “Salaried clients are given preference. If you are self-employed we are putting 30 days on the contract to get the bond approved.” Chris Tyson, MD of Tysons, said about half of applications were being approved and bond applications were often evaluated by inexperienced bank employees.

Cheryl de Marigny, operations manager of Just Letting, said although red tape was onerous, “it is there for a reason… to prevent the banks from lending to clients who cannot afford this”. Grant Gavin, broker owner of ReMax Panache, said: “The red tape is very frustrating, with the worst cases still involving applications from self-employed clients… we are not seeing too many applications for 100 percent bonds being approved.”

If you need to get finance for your property purchase please phone us on

(011)327-4489 or go to www.mortgagepluscc.co.za