A review of credit regulations by the banks and the governments financial policymakers right now could ease the position of the many potential, but not affluent, homebuyers, says Bill Rawson, Chairman of Rawson Properties.
Speaking recently at a Rawson function, Rawson said,
'It concerns me to see from the latest expenditure analysis that South African consumers are falling into the same trap that has caught so many in emerging economies. They are spending in the wrong areas'
The figures, said Rawson, reveal that a dramatic upswing in the spending on non-essential items such as furniture and white goods has been taking place recently.
'While this could be seen as an encouraging sign that the economy is recovering, it represents a complete rejection of the savings mentality which the state claims to want to foster '“ and it is a sign, too, that widespread property ownership, another declared government goal, is still seen as beyond their reach by large numbers of less wealthy people' said Rawson.
'We have been promoting the stabilising, wealth creating virtues of ownership for two decades '“ but right now, it seems, the emerging middle class is frittering away its incomes on goods which will have little or no resale value. This exactly the scenario we should be avoiding'
Although he remains a supporter of the basic principles of the National Credit Act, talks between the State and the banks, said Rawson, are now needed to bring about a lightening of the strictest NCA rulings '“ which have effectively cut the bond issue rate by 60%.
'I know,' said Rawson that the banks are still battling with repayments and I know we have seen real improvements in the rate at which bonds are now being made available '“ but we are nowhere near a situation where the family with earnings of, say, R8 000 to R15 000 per month can really start planning to buy a home'
Action is needed swiftly, added Rawson, because on figures he has seen it looks as if the banks expect interest rates from late 2010 to rise y some 3%, wiping out much of the ground gained by having a prime rate at 10,5%.
'Rises of this size will further disadvantage those who have little or no capital to get them onto the home owning ladder'
Those who are able to take action now, said Rawson, should do so, possibly asking for a fixed rate for the next ten years.
Rawson also drew attention firstly to the comments made in April by his MD, Tony Clarke, in which he pointed out that bond payment difficulties in the UK have been partially solved by allowing buyers to take mortgages on 30 to 70% of the propertys value initially.
'Even the economists got this wrong: they predicted a rise in the demand for credit but the opposite has happened. The money supply figures have grown by only 2,67% compared to 4% previously. This indicates that it is time to stimulate the economy and the housing market in particular'
For further information contact Bill Rawson on 021 658 7100 or email bill@rawsonproperties.com.
