The shift by banks away from mortgage finance towards unsecured lending has reduced the ability of the average South African to own a house.
This entrenched an economic advantage to those who already owned their homes and made it more difficult to transform the pattern of ownership in the economy, BMI Building Research Strategy Consulting principal consultant Llewellyn Lewis said this week.
He said that while there had been a boom in the numbers of the black middle class, the simultaneous shift in banking behaviour meant this had not translated into a proportionally greater ability for black householders to buy property.
He said total mortgage advances were expected to increase by 1.72 percent this year compared with last year but would be equivalent to only 44 percent of the mortgage advances made in 2007.
This had resulted in the property market remaining in the doldrums during the past 18 months, which was consistent with the stagnation in banks’ mortgage advances, he said.
In contrast, Lewis said the tremendous growth seen in unsecured lending was partly a result of a shift in lending from home loans to personal loans by the big four banks, with this shift abundantly clear in their latest financial results.
The reason for this shift was that unsecured lending was vastly more profitable than home loans and the lack of appetite for home loans was clear across the industry.
Steven Barker, the head of secured lending and personal banking at Standard Bank, said the bank had continued to provide mortgage finance and that there had not been a reduction in the home loans it granted, in line with the broader banking industry.
Barker said Standard Bank’s market share had grown by 2 percentage points to about 30 percent in the past year. Barker pointed to some uncertainty about the impact of Basel 3 requirements on longer-term loans and the profitability of those loans as contributing to the mortgage loans market coming off from the levels in the previous market run.
Attempts to obtain comment from Absa were unsuccessful.
Lewis said data for June showed there was just more than R1 trillion worth of home loans in South Africa, which was only 1.5 percent higher than a year ago, but in the same period the total assets of the banking system had grown by 7.8 percent, with unsecured loans the largest growth area.
However, Lewis stressed that this trend did not necessarily mean that fewer homes were being financed because some of the unsecured lending was being used to finance deposits on homes, with banks only willing to fund at lower loan-to-value ratios.
“So, the flat growth in mortgage finance does not mean that total property finance is flat, as some unsecured loans are being used for this. But a lot of that business is in the so-called gap market and not in the high end of the market.”
Lewis said there was a R233 billion decline in mortgage advances in only two years between 2007 and 2009.