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Uncertain politics not a long-term hurdle to SA property market

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Uncertain politics not a long-term hurdle to SA property market

Category Bond News

Political and civil unrest is expected to continue to be part of the South African scene, becoming increasingly vocal as well as radicalised, and major changes to the structure and current workings of the SA state are inevitable.

A very positive factor influencing the SA residential market is the banks’ improved, more competitive attitude towards home finance, says Dyer.

"Yet despite this, we can look forward to a future in which investment in residential property remains a sound, logical proposition,” says Rowan Alexander, Director of Alexander Swart Property.

According to Alexander, he recently attended a one-day conference organised by the mortgage bond originators Evo, a subsidiary of ooba.

The keynote speaker, John Loos, FNB’s economist responsible for analysing the property market, believes that as a result of the Zuma era’s plundering and mismanagement 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 economically ‘unexciting’, says Alexander.

However, in the interim, residential property can be relied on to continue to keep going forward, 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 go away but, if wisely implemented, need not be as disruptive as many fear, says Loos.

Rhys Dyer, CEO for ooba, says a very positive factor influencing the SA residential market is the banks’ improved, more competitive attitude towards home finance. The banks are confident that residential property will continue to show positive nominal growth, with the result that 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.

Dyer says ooba can now report that just over 90% of prequalified bond applicants are having their loans approved - a further indication of the importance of prequalifying. The number of first-time home buyers in particular has risen significantly as a result of easier access to bond finance.

He says the improved competition in the home loan financing market has also seen FNB increase its market share to 23.1% (R31 billion) for the last 12 months. It is now, therefore, challenging the frontrunner, Standard Bank, who with almost R33 billion in 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, says Dyer.

While FNB’s and other recent surveys have showed a slight decrease in semigration 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 recording inflation beating overall annual price increases in homes. Cape Town’s Northern Suburbs 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, says Alexander.

Alexander says this is good news for the Alexander Swart Property group, which is firmly rooted in and focused on the northern suburbs.

Author Property 24
Published 18 Sep 2018 / Views -
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