Banks' cautious about future of econimic/job conditions still making bonds hard to come by - chairman, Western Cape IEA
Although all the South African banks have raised the number of residential property mortgage bonds that they are prepared to issue and have improved the loan to value ratios (in some cases to 100 or even 105%) they remain cautious about SAs growth prospects. They think that the risks are still high and major job losses are not yet a thing of the past.
Their attitude appears to be that positions of many employees in all sectors could still be at risk, said Ivan Neethling, Chairman of the Western Cape branch of the Institute of Estate Agents.
For this reason, said Neethling, it may be some time before anyone other than the most secure and financially stable will qualify for bonds.
I have recently come across cases in which qualified professionals such as chartered accountants and a paediatrician failed to get the full bonds for which they applied regardless of the fact that they qualified for the full amounts and that there was sufficient equity in the properties they wanted to acquire. In one instance, one of the banks offered a bond of R1 million when the applicants had applied for a bond of R1,7 million, he said.
The strongest demand for home finance, said Neethling, is now coming from the R450 000 to R490 000 sectional title buyers and in this sector, we are at last seeing a flurry of activity from developers who realise that banks are more disposed to granting bonds in here than in other segments of the market.
On many projects, developers have, said Neethling, been drawing in buyers with a variety of additional extras such as burglar alarms, roll on lawns, post boxes and boundary walls and the like.
Even these, however, are sometimes insufficient to get the project selling quickly.
Developers who have been holding land with a view of turning a profit increasingly find that the debt servicing and other costs such as rates and protecting the property from illegal occupation, are eroding the possibilities of ever seeing a return on their investments.
Those developers who have sufficient resources and patience said Neethling, can now find land buys at exceptionally low prices and can put themselves in a good position for launching projects within the next six to nine months.
The good news, he added, is that 2010 will see the first real price rises in the residential property market.
This sector, he said, always reacts to the latest changes in interest rates three to six months after they have taken place. The exceptionally low interest rates in the UK and USA have resulted in three to four months of rising house prices. I see the same happening here. Now that we have had five consecutive rate cuts sales are bound to improve.
Many agents are already predicting that we will have shortfalls in the stock levels of new houses in 2010. This is directly attributable to the lack of activity by developers and the shortage of bond finance.
Article from: www.startprop.co.za