Good news for South Africa’s property market: banks are lending

The property market was even more buoyant in the first few months of 2019 than during the “Ramaphoria” period that gripped South Africa at the start of 2018, according to new data from bond originator BetterBond.

“Consumers and investors have maintained their enthusiasm for SA real estate even in the face of all the economic and political ‘noise’ leading up to the General Election on 8 May,” said BetterBond CEO Rudi Botha. “We believe the momentum can be maintained in the coming months if President Ramaphosa is seen to start delivering on his election promises.”

The statistics reveal that the number of applications for bonds has shown an increase for every month of the year so far when compared to the same month of 2018. In January, the number of applications was 7% ahead of the number for January 2018, for example, and in April, the number was 16% up on the number for April 2018. The year-on-year increase for the first four months of the year was 7.4%.

Betterbond noted that bond grant numbers for the first four months of the year have shown even bigger increases when compared with the same period in 2018. Botha said this is a reflection not only of rising demand among consumers but of the banks’ continued willingness to lend into the residential real estate sector.

“And this is borne out by similarly large increases in the value of bonds granted. The oversupply in the market means that home prices have certainly not achieved increases of this order, so the higher bond values are largely a function of the banks being willing to accept lower deposits and grant bigger loans to borrowers with healthy credit records and low debt loads,” he said.

Comparison of bond applications and bond approvals 2019 v 2018

Month Number of bond applications Number of bonds approved Value of bonds approved
January 2019 vs January 2018 +7% +21% +22%
February 2019 vs February 2018 +4% +16% +22%
March 2019 vs March 2018 +4% +16% +20%
April 2019 vs April 2018 +16% +27% +30%

The latest available statistics from the National Credit Regulator (NCR) show the extent to which the banks have been growing their collective home loan “book” over the past year.

The figures show that R42 billion worth of new home loans were registered in SA during the final quarter of 2018 (compared to R40 billion in the previous quarter) and that this brought the national total of mortgage debt outstanding to R939 billion, compared to R904 billion at the end of 2017- an 8.7% increase).

They also show that home loans currently account for around 29% of all new credit being extended to consumers, but almost 51% of all consumer debt outstanding.

Betterbond said that there are now just over 1.7 million active home loan accounts in South Africa, out of a total of more than 38.2 million accounts held by 26 million credit-active consumers.

“The NCR figures also underline the value of seeking assistance from a reputable bond originator like BetterBond when applying for a home loan,” said Botha. “They show that the overall approval ratio for new credit applications in SA has fallen to 44%, while our approval ratio for home loan applications has remained at more than 75% for the past two years.”

Botha said that by using the correct channels, favourable rates can be secured.

For example, the average variation between the best and worst interest rate offered on a bond application is currently around 0.5%, and on a 20-year bond of R1.5 million, that translates into potential savings of more than R120,000 of interest over the lifetime of the bond, as well as a total of about R6,000 a year off the monthly bond instalments.