The further decline in the South African Consumer Credit Index reported on recently by TransUnion (their third quarter figure is down to 43,14 as against the second quarter figure of 44,8) has not in any way been seen in the residential property market, says Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance.
“The TransUnion survey, which was widely reported on in the press, shows clearly that household cash flow has deteriorated as rising living costs, general inflation, job losses and lower wage increases (despite pockets of high wage rises) make themselves felt,” said van Alphen. “TransUnion actually goes so far as to liken today’s situation to that of early 2009, which is regarded by many as the lowest point in the recession.”
This gloomy analysis, added van Alphen, is supported by FNB, whose latest Bureau for Economic Research Consumer Confidence Index fell to -8 this quarter, as against a far more positive 1 in the second quarter and -7 in the first quarter.
“The FNB survey indicates that South African consumers expect the economic situation to deteriorate even further over the coming year,” says van Alphen.
Despite these negative reports, he says, the South African consumer has nevertheless been through a re-orientating process and has begun to change his priorities. Today, van Alphen believes, he sees home ownership in a far more positive light than in any period ever before.
“One has to realise that in the last decade, home ownership has become possible for a large percentage of the South African population for whom it was previously an unrealizable dream.”
This, said van Alphen, is especially evident in the middle price brackets (R800,000 to R1,2 million) and in the lower price brackets (R500,000 to R800,000). Here Rawson Finance figures and those of all South Africa’s big home lending institutions show that although the rejection rate is still unacceptably high, the demand for homes has never been stronger.
Asked to justify this statement with hard figures, van Alphen said that Rawson Finance’s turnover for August was just under 20% higher than its previous highest level (achieved in April 2013) – and, he added, the Rawson Property Group is by no means the only estate agency with a national footprint to record these sort of increases.
“What is particularly encouraging,” said van Alphen, “is that today’s home buyer tends to be more informed about the National Credit Act and to appreciate the need for discussing his credit position with responsible and qualified consultants such as bond originators before applying for his bond. This, in turn, means that the number of loan applications accepted is also rising steadily (to close on 70% at Rawson Finance) because those with credit blemished records are shown how to put them right – and it is surprising how often this can be achieved in under six months.”
A further boost to the demand for housing could be seen if the government implements the plan to give a credit amnesty to those with debt defaults below R10,000, said van Alphen.
Asked if higher priced homes will also now begin to see a revival in demand, van Alphen commented that there has been a steady, albeit slow, turnover here and the many buyers being able to put down deposits of 30% to 50% have done much to keep this market alive. Such buyers, he said, are often buying at prices that in five years’ time will have escalated significantly.