Home loan interest rates remain unchanged
June Tudhope
The South African Reserve Bank has announced that it is to leave its key repo rate unchanged at 11,0%. The decision was announced at the end of the Central bank's two-day Monetary Policy Committee Meeting.
Consequently, the Bank's prime rate remains unchanged at 14,5 %.
The authorities have not issued a statement regarding any changes to the FBT rate as yet. As soon as any communication is received, the appropriate announcement will follow.
First-time home buyers are getting older
Pretoria News
First time home buyers are getting older largely because they are adopting a “wait and see” approach towards rising interest rates before abandoning the less financially restrictive rental market.
Jeanne van Jaarsveldt, marketing and financial director for Re/Max, said that the majority of first time buyers entering the market opted for properties in the R460 000 to R470 000 range with the objective of creating an equity buffer to enable them to buy a more ideal home 18 to 24 months later.
Re/Max’s client base indicated that the primary age group of the first time buyer was between 25 and 30. The average size of their home was 48m2 to 85m2, with one or two bedrooms, an open plan kitchen/lounge and carport parking.
Manager of property finance and insurance processing for mortgage originator Mortgage SA, Kay Geldenhuys, said the current profile of their first time buyers was 35 and the average purchase price R580 000. A year or two ago, the age of their average first time buyer was 28.
In South Africa, people tended to be more tempted into buying new cars when making large acquisitions, she said. “Focusing on property was not what the younger generation was doing”
Research from a UK mortgage lender revealed that twenty-somethings in the UK prioritised friendship and new experiences over settling into family life, creating a “new life stage” between parental and married living that did not exist in the country 30 years ago.
Geldenhuys said 19 percent of their first-time buyer population was purchasing jointly with an individual who was not a spouse.
House prices set to drop
The Star
Real Levitt, chief executive of the Alliance Group, predicts that 2008 will be a year when the broader property market will face up to the reality that low interest rates drive prices upwards and higher interest rates push prices downwards.
House prices in certain metropolitan areas began to slip in the second half of 2007 and in 2008 these problems are set to get worse. Levitt says “many new home owners and new property developers took out loans in 2005 and 2006 at historically low interest rates. With the successive interest rate hikes, these borrowers are becoming financially squeezed with defaults picking up sharply. More defaults will follow, fuelled by the implementation of the National Credit Act, and result in more house sales and banks applying far more prudent lending practices.”
Levitt believes that this may boost South Africa’s listed property market. Taking into consideration the US sub prime crises, foreign investors may see SA, who has no sub prime lending market, as a safe haven compared to the more unstable markets of the wealthy countries.
Cuts worry developers
The Star
Property development is being severely hampered as “load-shedding continues, and the South African Property Owners Association (Sapoa) is stepping up its efforts to lobby the City of Johannesburg for answers in the interest of the commercial and industrial property industry.
“Power outages are threatening to slow down, if not entirely stop, the rate of property development in the city and country.” Warns Sapoa CEO Neil Gopal, pointing to outages that occur more and more frequently.”
The city of Johannesburg’s development planning and urban management executive director, Philip Harrison, says the city’s Growth Management Strategy, due to be finalised in February, will provide a clear and city-wide picture of development patterns and associated infrastructure capacity constraints.
Pinched homeowners scramble to sell
BusinessDay.co.za - South Africa
THE number of overstretched property owners losing their homes under the hammer has risen to record levels.
The Alliance Group of auctioneers said yesterday forced home sales surged 75%. It had experienced a 300% increase in inquiries from sellers trying to offload their properties "as quickly as they can".
Alliance Group CEO Rael Levitt said the company had experienced a 300% increase in enquiries this month compared with January last year. "Coupled to that, instructions from banks in the form of insolvencies and foreclosures have increased 75% in January, compared to January last year," said Levitt.
Growth in SA mortgage advances continue to decline
RodneyHayter.com - South Africa
A growth in mortgage advances of 24,1% year-on-year was recorded in December (24,8% in November), according to data released by the South African Reserve Bank.
This brought the total amount of mortgage advances to R849,8 billion in December. On a month-on-month basis, mortgage advances growth was lower at 1,4% in September (2,0% in November).
Absa says the slowdown in year-on-year growth in mortgage advances since peaking at 30,9% in October 2006 can be ascribed to the higher interest rates since mid-2006, while the effect of the National Credit Act (NCA) on credit extension,
including mortgage advances, is also becoming more visible. In December, the year-on-year growth in credit extension to the domestic private sector slowed somewhat further to 21,5% from 22,6% in November.