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Tuesday Oct 09, 2012

Number of home loans fall to all-time low

The number of mortgage bonds issued fell to an all-time low of about 9 000 a month in the third quarter from a peak of more than 50 000 a month in 2007, according to property analysts Lightstone.

Tony Clarke, the managing director of the Rawson Property Group, said yesterday that while this might look discouraging, those in the property market took heart from other data that showed the loan to value ratio was improving steadily for all the major banks except Investec, which was coming off a very high base.

Clarke said this data showed banks were willing to approve bigger loans and the average value of bonds approved had risen steadily, from about R400 000 in 2004 to about R800 000 this year. The value of second bonds had also increased, to an average of R350 000 from about R300 000 last year, he said.

Clarke said the government would be encouraged by the 16 percent year-on-year increase in the number of bonds issued in the affordable category, where house values range from R250 000 to R700 000. The number of bonds approved for township properties had also increased by 13 percent.

"Over 45 percent of all bonds now issued are for homes valued at under R1 million, indicating that the wealth imbalances in South Africa are being slightly ironed out," he said.

Clarke said the Lightstone report revealed that the big four retail banks in South Africa - Absa, FNB, Nedbank and Standard Bank - plus Investec and SA Homeloans, had to a large extent solved the 2008/9 unpaid mortgage crisis.

However, he said, this had resulted in the very significant cutback in the number of loans approved, which was the major factor preventing a full-scale recovery in the residential property sector.

Clarke added that there had been a steady decline in sale in execution notices and in the actual sales carried out following such notices.

He said the number of sales in execution had dropped to a few hundred a month by the third quarter, from more than 3 000 a month in 2009. In the second quarter of 2009, sales in execution were still above 2 500 a month, he said.

Clarke said Nedbank had the largest number of properties in possession in 2008/09 but all banks were now at almost the same level. This big improvement had resulted in less than 5 percent of sale in execution notices now resulting in the home being sold, he said.

The latest Lightstone survey revealed that home prices were rising by 6.5 percent year on year and Clarke believed the recovery would continue.

Business Report


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