Although there is much evidence that the tighter economic conditions are holding back the residential property market, the fact that the level of household debt in relation to disposable income is steadily improving indicates that South Africans are showing commendable restraint in their expenditure on less frivolous items. This is one good reason not only for faith in the residential market but also for thinking that the banks will continue, albeit it slowly, to ease up on the conditions they apply to their home mortgage loans.
These opinions were expressed recently by Bill Rawson, Chairman of Rawson Properties.
"The latest data from at least one major South African bank," said Rawson, "shows that lower growth in household incomes has been accompanied by lower debt levels. There are also clear signs, however, that housing remains the top priority for which salaried income earners are prepared to get into debt."
South Africans, said Rawson, now owe some 76% of their annual disposable income. This is, he said, not high by First World standards (Europeans on average owe 130% of their incomes, with Greeks, Italians and Spaniards borrowing at far higher levels). The figure is, he said, fairly high by emerging country standards, but in his view not excessive.
Rawson pointed out that the figures also indicate that household mortgage
debt now forms 60% (i.e. the vast majority) of the total average householder's debt in relation to income.
"At a time like the present," said Rawson, "it makes good sense for people to be investing primarily in housing because the interest rates are now so low and are likely to remain so for some 18 months. Those homebuyers who do qualify for bonds are today taking advantage of the lower interest rates and reducing their capital loan regularly as well as servicing the interest payments."
Some of the reports he has received, said Rawson, also indicate that in relation the anticipated inflation rate house price growth will be negative for the remainder of this year and much of 2012. However, most banks expect household mortgages lending to increase in the coming year by anything up to 10%.
"This," he said, "also makes good sense because no matter how gloomy a view South Africa takes of the global economic problems - and they are serious - it is not comprehensible that at a time when the mortgage rate is only 8% the number of loans granted should be 70% to 80% below the top levels achieved in late 2008/early 2009."
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
