It is now accepted by most mortgage bond originators that 2016/2017 will be years in which the number of residential property sales will decline from the 2015 level by anything from 5% to 15%, says John Smyth CEO of the bond origination company Multi-NET Mortgages.
“2015 was itself by no means an easy year for those of us involved in financing residential property, but many, including ourselves, through hard work and by honing up our skills, were able to increase our trade volumes and enlarge our client bases,” said Smyth. “The coming two years, I believe, will be more challenging but will also help to differentiate the really competent bond originator from those who give a less than adequate service.”
In the current circumstances, said Smyth, two trends in residential property marketing will help keep the market alive. The first is that, often encouraged by pro-active estate agents, existing home-owners are increasingly investing in second and third homes. This trend, he said, is fostered by the steadily rising rentals (up by 9% last year according to TPN) and by the banks’ willingness to consider giving bonds for this type of purchase provided that certain conditions are met.
“As always,” said Smyth, “the banks will look first at the applicant’s assured income stream, which will have to be capable of servicing two bonds. In addition, they will check on how much equity has accumulated in the existing bonds and if they issue these bonds the chances of their taking a favorable decision will be enhanced. If, say, 40% to 60% (?) is paid up, the banks will be far more likely to award a second bond. They will, however, never in these cases give 100% bonds. If the applicant can put down a larger than usual deposit, say 15% to 20%, his chances of getting a bond will also be greatly increased.”
The second trend helping the current market, said Smyth, is that there is a slow but definite revival of demand for larger and more expensive homes. Two years ago, he said, the demand for homes priced above R4 million was limited. Today, this segment is steadily gaining market share and this increase is likely to continue.
“I take this to indicate two things,” said Smyth. “Firstly, the better informed, more affluent South Africans are confident that, despite political and economic disruption, South Africa has a good future. The new trend also, I believe, indicates that such buyers are, due to the huge depreciation of the Rand, buying locally as opposed to overseas purchases and will also see a good property investment as a hedge/safe haven against the sort of inflation figures we can now expect in South Africa in the coming two years.”