Wed, 05 Sep 07
South African mortgage growth slowed in July - the 6th successive month of decline, reports MyProperty South Africa...
With residential mortgages accounting for over 80% of the total mortgage book, it is very much a residential market-driven slowdown.
On a month-on-month basis, an additional R17,3bn was added to the total mortgage value.
While much has been made of the implementation of the National Credit Act (NCA), John Loos, property strategist: FNB Commercial Property Finance, says the negative effect from this source on mortgage growth, if significant, may only be seen in the August mortgage figures.
Certainly, the July year-on-year growth slowdown would appear very normal and very expected, and merely part of the longer slowing trend that started long before the NCA.
Loos notes that the slowdown in growth of mortgage advances outstanding comes in lagged response to a slowdown in growth in new mortgage loans, which started as far back as 2004 (ignoring a mini-surge last year).
The long time lag between a surge in new mortgage loans granted and the eventual peak in mortgages outstanding growth has much to do with the length of time that capital repayments growth takes to catch up.
A deteriorating interest rate environment post-2003, first in the form of the slowdown and eventual end of interest rate cutting and then due to interest rate hikes, drove residential demand growth slower in recent years. This year, a mildly slowing economy should also play a role in further slowdown.
Will the NCA have a major impact on the figures? Loos says according to most reports it is having an impact.
FNB’s Property Barometer survey of estate agents reported a further decline in activity levels in the residential market in July, and many agents were reporting clients battling to get loan approvals due to the NCA.
A declining trend
Loos concluded: The NCA impact could be seen in the coming months’ mortgage figures, but it may be difficult to isolate the NCA effect, given that the market has been slowing, interest rates are rising, and mortgage advances growth has been on a declining trend for some time.
Regardless of how large the NCA impact is to be, I anticipate the declining growth cycle to last all the way through to late 2008 at least. I anticipate new loans granted growth to pick up in the first half of 2008, but given the lags this may only turn growth in total mortgages outstanding upward in 2009.
Back to: News Index