Bond applications reached their highest level in three years and bond approvals were at the highest value since October 2008 according to figures released.

The statistics showed that the average number of bond applications in March was 36% higher that the average monthly number of applications in 2010. However, the figures represent just 36% of the applications recorded when the property market was at its peak in May 2007.

Saul Geffen, says that the organisation has experienced consistent month-on-month growth in applications for mortgage finance since the beginning of the current year.

“February was significantly higher and March was even better than that,” he says, adding that expected the number of bond applications to continue increasing over the next few months.

He says that the reduction of interest rates – which have fallen by 650 basis points since 2008 – was certainly a contributory factor. “Interest rates are at a 30-year low and this has improved affordability of homes for thousands of people,” he says.

He points out that the low interest rates, improved affordability, subdued property price rises, low inflation rates and real wage growth combined to create a more favourable environment for homebuyers.

“The relaxation of the lending criteria by some banks has contributed to the rise in applications and approvals because the ability to obtain financing remains one of the biggest drivers for the property market,” he added.

Meanwhile, First National Bank suggest that the South African rental market has remained relatively flat for the first quarter of this year but available data suggests there may be some improvement in the demand for rental accommodation.

Property strategist John Loos says it is difficult to determine the level of rental demand in the current economic cycle but household financial pressure could be a positive factor for the rental market because it could increase the appeal of renting for certain households.

He says that the percentage of home sellers who are looking to downscale – mainly because of financial pressures – remains high at about 22% of the market and many sellers are opting to rent a property rather than buy something at this stage.

Loos says that the average rental for flats in major cities has increased with a year-on-year increase of 16,2% for the fourth quarter of last year.- property24.com

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Banks lent even less money to people wanting to buy a home in February and statistics show that mortgage advances declined from 3,8% in January to just 3,4% in February according to data released by the South African Reserve Bank.

Outstanding mortgage balances in the household sector increased by 4,1% year-on-year in February after rising 4,6% in January. On a monthly basis, household mortgage balances were up by R2,8-billion in February compared with the previous month.

According to Jacques du Toit, senior property analyst at Absa Home Loans, the declining trend in mortgage advances is believed to be related to various factors including the ratio of household debt to disposable income that was at 77,6% at the end of last year.

“The percentage of credit-active consumers with impaired credit ratings remained high at 46,5%, in the final quarter of 2010 and this situation impacts on the consumers’ ability to take up credit against the background of the National Credit Act. Moreover, the banks’ lending criteria remained strict,” says Du Toit.

He says that significant increases in the fuel price and rising food inflation are also having an impact on consumers emphasised by the fact that consumer confidence had fallen in the first quarter of this year.

Total mortgage advance reach R1 047,6-billion in February this year, while mortgage advances to households at the end of February were at R764,2-billion equivalent to 73% of the total.

Du Toit says that mortgage advances growth is forecast to remain in single digits for the rest of this year.

“The cost of servicing household mortgage debt as a percentage of disposable income was around 4,3% in the last quarter of 2010. This was the net result of trends in growth of household mortgage debt – that increased by 0,9% during the period – and a lower mortgage interest rate,” says Du Toit.

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