Tito Mboweni is the first South African Reserve Bank governor to have become a true celebrity!

Everywhere he appears in public, groupies hang onto his lips, frantic to know whether there will be another rate-cut or not. The groupies, however, are atypical. Not lingerie-throwing, screaming teenagers but normal homeowners paying off their prime-rate linked mortgage bonds. Never before has mortgage bond finance provided so much fodder for dinner party conversations.

Leading insights and analytics company, Knowledge Factory, in conjunction with their property data division SAPTG, have just released a study of mortgage bonds and trends in South Africa.

Their findings make for interesting reading. The research focused on transactions in the period June 2008 to May 2009. The study included residential full and sectional title properties in the price band R200 000 to R20-million.

Dieter Deppisch, who heads Knowledge Factory’s property data research, explains:

"The pre-June 2007 days of a relaxed lending environment were distinguished by largesse. Home buyers, bond originators and banks were happy bed-fellows. Then the National Credit Act (NCA) created a perception of gloom, causing widespread fear and a contraction in credit extension. Worse, the winds of the worldwide recession made landfall shortly afterwards and South Africa’s economy began to deteriorate rapidly. Interest rates followed the upward spike in inflation; banks sat with toxic assets, and quickly tightened their lending criteria to stem the blood-flow."

2004-2007 — bonded property de rigueur

In the period 2004-2007, bonded property transactions were de rigueur. They reached a peak in the period June 2006-May 2007 with 77.7 percent of all properties being registered with a bond.

Of these, the largest group (78.5 percent) was sectional titles purchased in the R200k-R1.5-million price band, with full-titles coming in a close second (78.2 percent). However, the decline in bonds being registered began shortly thereafter and has continued unabated to current levels where only 63.3 percent of properties were registered with a bond in the 2008/2009 period.

The flipside of the statistics above indicates a surprising level of liquidity amongst current buyers in the real-estate economy.

36.7 percent of properties purchased in the past year were cash deals (properties transferred with no bond registered). This statistic must, however, be qualified: Full-title property sales dropped by 40 percent and sectional title by 44 percent in the period June 2008 to May 2009. So while the percentage of cash sales is high, it is of a smaller volume of transactions than we had a few years ago when real-estate was booming.

Property is an increasingly attractive asset class for investors disappointed by recent poor returns in the equity market and other investment classes and this has served to boost cash sales.

Article by: www.iafrica.com