In a recent radio interview with Warren Thompson from Moneyweb, FNB household and property sector strategist, John Loos, noted that the home loans approval rate is currently at its highest level in 10 years – surely a sign that things are looking up in the real estate sector?

Loos also noted that one of the main reasons for the increase in approvals is that households generally seem to be in better shape financially – and thus more able to qualify for home loans.

“Financial stress has remained low through the most recent interest rate hiking cycle and now it looks as if it has been declining in the mortgage sector too,” he said. “In fact, since the implementation of the National Credit Act there have been relatively low levels of non-performing loans and it seems that the perception of the risks being low may be a factor in the banks being bolder now when approving bonds.”

Statistics that point to the improvement in household finances include those that show how the arrears total as a percentage of the total consumer credit outstanding has been declining steadily since about 2016, and the FNB Estate Agent Survey which shows that the percentage of property sellers who are seeking to downscale to relieve financial pressure is also continuing to fall. It was an estimated 12,1% in the first quarter of this year compared to 14,2% in the last quarter of 2017.

“This measure is now at a very low level compared to the 30% the market experienced during the 2008/ 09 recession,” says MJ Dafel, the COO of real estate company Property.CoZa. “We remember because our company was founded then and we had to develop a robust business model to deal with those challenges. That is one of the reasons we are still one of the fastest-growing real estate groups in the country.”

Loos also said the recent VAT increase is not expected to have any noticeable effect on affordability and bond approval rates. “Although it puts some constraint on household budgets, consumers will learn to adjust, and it is being off-set by the recent interest rate cuts.

We are predicting property price growth of between 5% and 6% this year, which is conservative but positive because it will prove that consumers are not reckless but responsible compared to the previous decade, and because slow and steady growth is more sustainable for the future.”

Property.CoZa Financial Services MD, Johan Van Zyl, says: “All indications in the property market are currently very positive. Banks are competing for market-share again and this bodes well for the industry. Interest rates have reduced over the past few months and this also spurred on consumer confidence.

“Due to the banks having more appetite, their credit policies have been relaxed a bit which means overall approval of bond applications has increased and a further benefit is that the interest rates are more competitive. This is evident in the latest statistics from our originator, MultiNET, which is the third-biggest mortgage origination company in SA.”

MultiNET director, Carl Pretorius, says the stats show that:

  • The average bond approved amount increased by 3,6% from the first quarter of 2017 (R847 700) to the first quarter of 2018 (R877 987).
  • The average deposit required declined by 2,4% from 17,22% of purchase price in the first quarter of 2017 to 15,2% in the first quarter of 2018.
  • The percentage of applications declined fell by 7,2% from 40,7% of the total in the first quarter of 2017 to 33,5% of the total in the first quarter of 2018.

Gustav Kruger, CEO of Property.CoZa, says: "We are experiencing year-on-year growth, which can largely be attributed to the fact that we keep on growing as a national brand with more franchises, property professionals and market-share every month.

However the upswing in the marketplace that is now reflecting in the bond approval rates definitely has a big role to play in this as well. Everything suggests that there are more exciting times ahead this year in the real estate marketplace.”

Listen to the full interview with John Loos here - Home loans approvals reach highest levels in a decade