News
Nasty mortgage surprise for bankers
January 31st, 2008
Realestateweb reporter
30 January 2008
Sharp drop off in demand for loans to fund property projects – commercial and residential stats.
The commercial property sector was expected to cope better with rising interest rates than the residential market - but latest mortgage figures show that growth slowdown is across the board.
FNB’s home loans division expects the slowdown to continue well into 2009.
Graphs show that it started back in 2006.
Growth in total mortgage advances outstanding slowed from just under 25% year-on-year in November to about 24% in December, “now well down from the 31% peak in October 2006”, said property strategist John Loos.
He expects the SA Reserve Bank’s Monetary Policy Committee to leave the prime rate at 14,5% when it meets on Thursday and thinks we could see the first rate cut later this year.
The residential market accounts for about 80% of total mortgage advances. Its mortgage advances slowed, said Loos, from about 33% in October, year on year, to just over 24% in November.
The “smaller commercial property mortgage market has held up better over the past year-and-a-half”, said Loos, though it has also taken a knock. It showed year-on-year growth of just over 30% in November - down from 42% in November 2006.
Demand for new loans is now “very weak”, said Loos.
New residential mortgage loans dropped by nearly 5% when “zooming in” on the third quarter of 2007 (figures are released a quarter behind), and commercial loans slipped about 1% into negative terrain.
New developments seem to be on a rapid decline, with vacant land mortgage figures down a staggering 32% year-on-year in December and loans for the construction of new buildings down too, at about -13% in value.
“The slump in vacant land and new construction mortgages is believed to be driven largely by the residential side of the property developments market, with new commercial development growth holding up significantly better.”
He said the commercial sector is driven by very low vacancy rates - particularly industrial and office.
Quality of mortgage loans is also deterioriating, with the number of people in arrears growing. As a percentage of total mortgages outstanding (residential and commercial), losses are still below 1% (arrears by over 12 months), while the figure for people who are in arrears by one to two months is now at around 3%.
“An extreme situation is not anticipated”, said Loos, though a further rise in losses is expected this year.
src: realestateweb.co.za
Realestateweb reporter
30 January 2008
Sharp drop off in demand for loans to fund property projects – commercial and residential stats.
The commercial property sector was expected to cope better with rising interest rates than the residential market - but latest mortgage figures show that growth slowdown is across the board.
FNB’s home loans division expects the slowdown to continue well into 2009.
Graphs show that it started back in 2006.
Growth in total mortgage advances outstanding slowed from just under 25% year-on-year in November to about 24% in December, “now well down from the 31% peak in October 2006”, said property strategist John Loos.
He expects the SA Reserve Bank’s Monetary Policy Committee to leave the prime rate at 14,5% when it meets on Thursday and thinks we could see the first rate cut later this year.
The residential market accounts for about 80% of total mortgage advances. Its mortgage advances slowed, said Loos, from about 33% in October, year on year, to just over 24% in November.
The “smaller commercial property mortgage market has held up better over the past year-and-a-half”, said Loos, though it has also taken a knock. It showed year-on-year growth of just over 30% in November - down from 42% in November 2006.
Demand for new loans is now “very weak”, said Loos.
New residential mortgage loans dropped by nearly 5% when “zooming in” on the third quarter of 2007 (figures are released a quarter behind), and commercial loans slipped about 1% into negative terrain.
New developments seem to be on a rapid decline, with vacant land mortgage figures down a staggering 32% year-on-year in December and loans for the construction of new buildings down too, at about -13% in value.
“The slump in vacant land and new construction mortgages is believed to be driven largely by the residential side of the property developments market, with new commercial development growth holding up significantly better.”
He said the commercial sector is driven by very low vacancy rates - particularly industrial and office.
Quality of mortgage loans is also deterioriating, with the number of people in arrears growing. As a percentage of total mortgages outstanding (residential and commercial), losses are still below 1% (arrears by over 12 months), while the figure for people who are in arrears by one to two months is now at around 3%.
“An extreme situation is not anticipated”, said Loos, though a further rise in losses is expected this year.
src: realestateweb.co.za