Little new demand in housing market

Published Mar 20, 2015


Roy Cokayne

THERE is little new demand for houses in South Africa and the volume of bonded residential property transactions averaged 11 344 a month last year compared with about 24 000 a month between 2005 and 2007 during the twin peaks of the last property boom.

John Loos, the household and property sector strategist at FNB Home Loans, yesterday said the volume of residential property transactions had improved from 5 000 a month in January 2009 during the global financial crisis and the average monthly transactions for that calendar year of R7 195.

“Volumes are less than half of what they were during the boom time. However, the outstanding home loan book for the entire industry has remained fairly constant at about R850 billion,” he said.

Marius Marais, the chief executive of FNB Home Loans, said value of transactions in the previous property boom averaged about R20bn a month for the industry compared to only about R10bn a month now.

Loos said the higher frequency of people transacting on their properties and switching their home loans to another had amplified the volume of transactions during the previous property boom.

Tommy Nel, the head of credit at FNB Home Loans, added that part of the property boom was amplified by buyer panic, with consumers buying now because of a fear that in three months time they would not be able to afford it.

Loos said estate agents were reporting strong transaction figures because many estate agents had left the industry during the slump, resulting in the bigger estate agency groups taking a bigger share of the market.

Marais said FNB’s home loan division had grown advances by 6 percent year on year in the year to December last year and by 13 percent over the past three years.

He said this compared well with the growth achieved in the market, excluding FNB, of 0.5 percent in the last year and 5 percent over the past three years, to outgrow the market in terms of its mortgage loan book.

Marais said FNB had about a 17 percent market share of the industry’s existing home loan market, placing it among the top three banks.

But he said FNB was “punching well above that” for new home loan advances, where it had a market share of about 23 percent and was among the top two banks in this market.

However, Marais stressed that being the biggest did not mean the bank was the best and stressed FNB Home Loans did not have a market share target, but focused instead on its returns and its risk profile.

He said 2.9 percent of FNB’s home loans were categorised as non-performing loans compared with 4.4 percent for the industry, which demonstrated that FNB’s superior levels of growth had not been achieved at the expense of credit quality.

He said FNB’s product features, such as Future Use, which allowed clients to register a higher bond at the time of taking out the loan to give them the opportunity to borrow it in the future without having to pay further legal fees, and flexi- options that allowed customers to use their home loans as savings tools, were proving popular with clients because they provided financial flexibility.

Marais said FNB Home Loans expected to make announcements on new home loan innovations within about the next four months, although these were not expected to make a big difference to the bank’s lending criteria.

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