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 Acutt said the heavy reliance on credit checks jeopardised clients because in some cases information was outdated.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.”

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RE/MAX International’s Senior Vice President of International Franchise Sales Peter Gilmour earlier this week said that there has been a seven per cent year-on-year increase in real estate property transactions during summer in the US. He also stated that South Africa remains one of the better performing global property markets.

“Within the US the real estate market is optimistic despite the continued decline in property sales and ongoing bank repossessions. The projected number for property sales transactions for 2009 is 5 ½ million and although a far cry from the figure of 8 million recorded for 2005 is still positive compared to results recorded for 2008.

“The number of pending home sales, properties that have sold but not transferred, is up for the seventh month in a row and is at the highest level since March 2007. A higher Pending Home Sales index indicates better sales in the coming months and shows buyers are returning to the market.”

In terms of transactional activity, Gilmour said that first time homebuyers account for approximately one third of all property sales transactions within the US largely due to the US$ 8 000 tax subsidy deduction policy instituted by the government. Sharing the remaining balance are investors who, making the most of a depressed sellers market, are buying homes for between 20 and 30 percent of the market value of two years ago, and then there are the ordinary buyers, who have remained unaffected by market conditions.

“Homebuyer subsidies have not yet been renewed which is a concern to the US real estate industry. As a result strong industry lobbying efforts are being undertaken in a bid to obtain further extensions to homebuyer subsidies and in so doing unlock the door to recovery of the US property market.”

“Leading the journey out of the recession are the states California, Arizona and Nevada that were first affected by the recession. We anticipate that those states along the East Coast will take a little longer to recover.”

“Amidst a slow recovery, obtaining a mortgage remains a rigorous task. Banks remain conservative and there has been no substantial change in lending policies. Potential home buyers are still required to submit 10 – 20 per cent cash deposits. The very complex US credit rating system is also severely hampering sales.”

Gilmour further added that commercial property is taking a tremendous strain at the moment.

“Vacancies are up in all areas, businesses and individuals are extremely cautious and conservative when considering their needs, and rental negotiations are also difficult. The returns on commercial properties will drop substantially which will impact negatively on their value.”

Gilmour advised that the most active property sales transactions are taking place in the entry-level US$ 100 000 – 300 000 price bracket. “Buyers are looking for smaller units that are close to transport infrastructures and place of work. The luxury property market is very slow throughout the US although distressed sales are attracting investors.”

For more home loan options please go to www.mortgagepluscc.co.za or looking for property in SA please go to www.mortgageplusproperties.co.za or www.propertymax.co.za