Hopes grow as emerging markets gain access to bonds

The decision by certain South African banks to offer bonds to the emerging market is welcome, says Ivan Neethling, Chairman of the Western Cape branch of the Institute of Estate Agents - but it should raise questions about the banks’ policies on bonds in general, he says.

Neethling was commenting on FNB’s decision to offer bonds to individuals or families whose monthly earnings are below R15 000 and ABSA’s decision to make bonds available to those earning below R11 000.

“The return of the banks to the emerging sector is in line with the Memorandum of Agreement that they signed with the government previously,” says Neethling, “and it shows a growing confidence in the affordable housing market’s ability to meet commitments. The Institute has for some time now been saying that this market has become a great deal more stable and responsible and deserves recognition.”

Neethling says, however, that it is worrying that while some banks are taking this step, others are still hanging back and staying outside this market.

“At a recent get-together of property practitioners,” he says, “it was said that one bank, which previously had a long history of service in the housing sector, had given only two bonds to Khayelitsha buyers in the last two months. This sort of reluctance in the face of such huge demand for affordable housing makes no sense at all.”

Equally worrying, says Neethling, is the fact that in the more expensive home categories some banks have increased the size of the deposits they are demanding by an additional 5%, making the maximum bond available to most buyers 80% of the purchase .

“The cutbacks in the middle and upper brackets also make very little sense to us at the Institute,” says Neethling, “because this sector of the market has traditionally been reliable payers and with the current National Credit Act restrictions, which have now been in place for 18 months, are already very closely monitored before being granted any sort of loan.”

Article by: www.startprop.co.za