SA's slow economic growth and civil unrest "shrugged off" by the residential property market
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SA’s slow economic growth and civil unrest “shrugged off“ by the residential property market – and banks increasingly competitive in the home loan market
Although political and civil unrest will continue to be part of the South African scene and will become increasingly vocal and radicalised, and although major changes to the structure and current workings of the SA state are inevitable, we can look forward to a future in which investment in residential property remains a sound, logical proposition.
This was said by Rowan Alexander, Director of Alexander Swart Property, after attending a recent one-day conference organised by the mortgage bond originators EVO, a subsidiary of OOBA.
The key note speaker, John Loos, FNB’s economist responsible for analysing the property market, said Alexander, believes that as a result of the Zuma era’s plundering and mismanagment of the economy it will take a long time for South Africa to achieve a satisfactory growth rate and the next few years will be “unexciting” economically. However, in the interim, residential property, Loos says, can be relied on to continue to keep going forwards, without any spectacular highs or lows, while those in power in the state work at creating a more efficient society with more evenly distributed wealth. The call for land expropriation will not, says Loos, go away but, if wisely implemented, need not be as disruptive as many fear.
Also addressing the conference was Rhys Dyer, CEO of OOBA. He said that a very positive factor influencing the SA residential market is the banks’ improved, more competitive attitude to home finance. The banks, said Dyer, are confident that residential property will continue to show positive nominal growth with the result that, although the volume of home loans issued has decreased so far in 2018, the approval rates of home loan applications have risen. This is due to the banks now competing more seriously for the available business and taking a more “relaxed” stance on deposits and interest rates. In June, for example, the average interest rate on bonds was only 0,2% above prime, whereas in the 24 months prior to June the average had been 1 to 1,5% above prime.
OOBA, said Dyer, can now report that just over 90% of pre-qualified bond applicants are having their loans approved – a further indication of the importance of pre-qualifying. The number of first time home buyers in particular, he said, has risen significantly as a result of easier access to bond finance.
The improved competition in the home loan financing market, said Dyer, has also seen FNB increase its market share to 23.1% (R31 billion) for the last 12 months. It is now, therefore, challenging the front runner, Standard Bank, who with almost 33 billion loans awarded in the same 12 month period had 24,3% of the market. FNB does, however, have the lowest retention rate for their own clients on home finance – only 42% of their clients have recently arranged their bonds through them. In the last three months FNB outperformed Standard Bank and it is likely that this trend will continue. By way of contrast, Absa lost ground in the home loans market with only 17,9% of the market (R24 billion for the last 12 months) while Nedbank after introducing a more aggressive price model grew from a low base to 13,8% of the market share (R19 billion). Investec, who previously had a relatively low profile in the home loan market, focusing mainly on the upper bracket, captured 10,2% of the home market with 13,7 billion loaned in the last four months.
While FNB’s and other recent surveys have showed a slight decrease in semi-gration from Gauteng and other SA provinces to the Western Cape, it still remains the most popular destination for those seeking to relocate. For example, 53% of repeat outbound home buyers from Gauteng headed there. The Western Cape is also, said Alexander, recording inflation beating overall annual price increases in homes . Cape Town’s northern suburbs, added Alexander, have in recent months proved among the most stable of Cape Town’s home markets with consistent price rises and have not undergone the big price drops seen this year on the Atlantic Seaboard and other high-end suburbs. This, said Alexander, is good news for the Alexander Swart Property group which is firmly rooted in and focused on the northern suburbs.
Author: Independent Author
