Property sector: home loan criteria: Dr Willie Marais national president, Institute of Estate Agents of South Africa
Prices set to decline for rest of the year, but banks more approachable.
FELICITY DUNCAN: There is more bad news on house prices again today - Absa says prices will be declining for the rest of the year. Dr Willie Marais, the national president for the Institute of Estate Agents of SA, is on the line here. Willie, from your side, the agents' side, you interact with a lot of banks, trying to get home loan approval. What kind of feedback are you hearing about lending criteria at the banks?
WILLIE MARAIS: Well, the good news is it is far better than four or five months ago. Four or five months ago I could have told you that about two out of ten home loans would be approved. Now that figure has risen to about four to five out of them. But there has been no official announcement from any of the major banks that they are in fact lowering their loan-to-value requirement, although one major bank has been leaking it into the market that they will consider up to 95% LTV.
FELICITY DUNCAN: But we are still not seeing the kind of 100%, 110% bonds that we've seen a couple of years ago?
WILLIE MARAIS: I don't think we will see that soon. Not that the estate agent's profession is against that, but it shouldn't be applied recklessly. There are people you can give 110% loans to, but you have to do it at an acceptable risk. What is happening is that the banks are all looking currently - and that's the catchword - at the behaviour of the purchaser, that behaviour, personal behaviour, and I think that is responsible. That is a definite indication of future business behaviour of the banks.
FELICITY DUNCAN: So that's more like your credit history - do you have a loan, credit card, that kind of stuff?
WILLIE MARAIS: That kind of stuff too, but they will also look at how often you change jobs, if you are married, how often have you been married, that type of thing. Normally the past never plays a role, but it is definitely coming into play.
FELICITY DUNCAN: Interesting, David. How often you you've been married - I suppose you would be less reliable.
DAVID SHAPIRO: Ja. I'm very boring!
FELICITY DUNCAN: Dr Marais - if you are talking of an entry-level family here, what sort of salary would you have to be earning if you wanted to go today, in current market conditions, and apply for, say, a R350 000 bond?
WILLIE MARAIS: In terms of the current criteria remember, at least two banks have officially said that for the lower income groups that they are definitely looking at a far lower loan-to-value, in the region of 90, 95, even 100%. And if you look at about a R350 000 house, according to that type of criterion, you would have to be earning in the region of R10 000, R11 000, R11,500.
FELICITY DUNCAN: OK, so that's just sort of to get into the market?
WILLIE MARAIS: Correct.
FELICITY DUNCAN: Now you say that it's better than it was six to nine months ago - what do you see happening for the remainder of the year, perhaps into next year?
WILLIE MARAIS: Well, I think we are also in the winter of the real estate industry, but we are seeing sorts of signs of spring coming. I don't think it will get worse, although we have heard today again that they say that house prices will get lower. We ascribe that to the market accepting the criteria - translated that means that sellers are now really willing to start negotiating on price. Up to fairly recently we still had totally unrealistic price expectations of sellers, and that is starting to change. And we also see that the valuations from the banks are getting better. We are getting valuations in excess of some of the sales prices, which will obviously change the loan-to-value that they approve. And they are quite happy with that, not to stick with the strict 70 or 80%.
FELICITY DUNCAN: So sort of optimistic growth there?
WILLIE MARAIS: Well, let's call it fairly optimistic. It's not over. We are still heavily into a buyers' market.
FELICITY DUNCAN: Dr Willie Marais is the national president of
the Institute for Estate Agents of South Africa.
DAVID SHAPIRO: I think it's the last few years. But I can only take the gauge over the last ten years of property shares on the JSE. I'm talking about property trusts - phenomenal performance, together with the income that you earn. So your total returns have been staggering. But I would imagine that would flatten out.
FELICITY DUNCAN: I would wonder, because the commercial property market remained pretty...
DAVID SHAPIRO: That's side has remained pretty OK, stable. I think it's the housing markets that have been under pressure. I suppose the big question is what the overhang is of built houses, of new developments that come onto the market.
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