Ouch! More bad mortgage figures point to scary property scenario

Don't expect the residential property market to recover before 2010. And, be warned: commercial property is looking worse than expected.

This was the message from FNB today, in its analysis of September South African Reserve Bank outstanding mortgage advances figures, which were released this morning.

A graph showing mortgage growth declining steadily since 2006, which is when interest rates started rising, highlighted the weakening trend in the residential sector.

Year-on-year growth declined from 17,6% in August to 16,6% in September, noted property strategist John Loos.

The bank believes that figure could reach 0% and even drop next year - suggesting the tough times are set to continue for estate agents, originators and property sellers in general.

Loos said that although demand for residential property is expected to begin to pick up towards mid-2009 "on the back of expected rate cuts", this is only expected to be seen in the outstanding mortgages number in 2010.

Residential mortgages advances, the largest mortgage category, continued their steady slowdown but commercial property is also looking like it is taking strain.

"While holding up a little better, commercial mortgages have also been on a broad declining trend...since a peak in late-2006, reflecting the reality that this sector too has been somewhat negatively affected by rising interest rates and deteriorating economic prospects," said Loos.

FNB reckons the numbers will continue ticking down because the outstanding mortgages situation has yet to fully reflect the sharp decline in new mortgage loans granted - especially residential.

"This is due to the long leads and lags between the granting of loans and capital repayments."

Loos said "the ongoing deterioration in year-on-year growth of loans outstanding is an indication that the effects of the residential-led property slump are increasingly visible in the numbers".

It is possible, said Loos, "that year-on-year growth in the overall mortgage number could reach 0% and head into a short period of negative growth towards mid-2009".

Article from: www.realestateweb.co.za