Estate agents say bank lending criteria hampers market

Estate agents have painted a rosier picture for the residential property market in 2011, but warned that prices were being held down by bank’s strict lending requirements.

Berry Everitt, CEO of the Chas Everitt International property group, said on Wednesday home price growth would pick up again towards the middle of 2011, but would be constrained until banks become more lenient.

“I do think that this (the housing market) will be constrained below 10 percent unless the banks become quite a lot more lenient – which is going to take time because household debt levels are still high and they are still dealing with quite a large number of distressed sales and properties in possession,” he said.

Everitt said the property market had “excellent opportunities” for investors who could afford to buy additional properties, with the best “buys” being properties in popular coastal locations.

Jan Davel, the managing director of the RealNet estate agency group, said the residential property market had several factors in its favour for 2011, including exceptionally low interest rates, slower than expected consumer price inflation and decreasing levels of household debt.

Low interest rates were helping the property market by putting extra money into “household piggybanks” and boosting the demand for credit such as home loans, he said.

“Over the past few months this has already been evident in an increase in home sales activity that will no doubt continue if there is another rate cut early in the year, which many economists are predicting,” Davel said.

Property professionals and consumers however, all still had to be cautious and patient. “We are not going to see another boom period like 2003 to 2006 anytime soon,” he said.

“The market is going to take some time to recover, and we don’t foresee a major upswing in 2011 or even 2012.”

Lew Geffen, chairman of Sotheby’s International Realty in SA, said he was “bullish” about the prospects in 2011 for the market sector in which his company operates, where the average sale price is around R2.5 million.

“In 2010 we saw volumes increase in this sector by 30 percent and prices move up by around eight percent with the third quarter being particularly encouraging, and we expect this positive trend to continue in 2011.

“The market has really bottomed out now, lending has loosened up somewhat and pent-up demand among those looking to upgrade is starting to come through.”

Geffen said buyers coming into the market were “real quality”.

“We are seeing a bond application refusal rate of just four percent compared to an average of 15 percent historically,” he said.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

White applicants for properties has been consistently less than the combined total of Black and Coloured applicants over the last three years.

The most notable of these trends is that the percentage of White applicants has been consistently less than the combined total of Black and Coloured applicants over the last three years.

The proportion of Black applicants has risen steadily over the last few years, averaging 42% during 2009. However, this percentage has dipped in the first four months of 2010 to 38%.

In contrast, the proportion of white applicants has risen from an average of 43% in 2009 to 47% during the first four months of 2010. The proportion of Asian and Coloured applicants has remained constant since the beginning of 2008, averaging 8% and 7% respectively.

According to Saul Geffen, the downward trend in the percentage of Black applicants in 2010 can likely be attributed to the fact that the tough economic conditions and stricter lending criteria have had a bigger impact on potential buyers at the lower end of the property price spectrum.

The data shows that potential Black buyers make up 60-70% of total applicants for properties valued at less than R500 000. This proportion drops significantly to around 30% for properties valued at between R500 000 and R1 million, and 10-20% for properties valued at over R1 million.

“The stricter bank lending criteria imposed under the NCA has also made it particularly tough for first time home buyers who aren’t able to meet the affordability criteria.”

However, Geffen says that as the economy recovers, the percentage of Black buyers will likely re-commence its upward trend. “We expect to see an increasing percentage of Black buyers in line with the shifting  economic base in South Africa.” 

By choosing Mortgage Plus for a loan, you will get that continual service to make sure you are getting the best deal possible.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za