PROPERTY: Banks Pulling Down House Prices
Recent Western Cape Business News
For now, near-term prospects for the beleaguered housing market remain bleak; this as weaknesses in the residential mortgage market are likely to persist, according to Bellville-based Rode & Associates.
After peaking in the first half of 2010, the yearly growth in the value of new mortgage loans granted for residential property has been heading strikingly south. In fact, the deceleration in growth has been so sharp that in March 2011 the value of new loans granted was actually lower than what it was a year earlier. Naturally, contractions in mortgage loans granted, act as a restraining factor on price movements.
The residential mortgage and house markets can at least take heart from the solid growth (+8%) in nominal household disposable income recorded in 2011q1. What’s more, the trend for hikes in wages and salaries to exceed inflation by a wide margin seems to be neverending — never mind the eventual value-destroying consequences. For now, however, financiers will continue to be constrained by the still frustratingly high ratios of debt to disposable income, which have not come down by much since the peak of the boom. Naturally, this forms an important brake on the granting of mortgage bonds. In addition, the looming interest rate hikes in the wake of rising inflation are not going to improve affordability. Add to this the litany of sharp increases in utility charges, toll roads, rates and taxes on property, and the introduction of National Health Insurance.
And then we haven’t even considered the problems that the fiscus will face in years to come. Real house prices will keep declining for another few years.
Business News Sector Tags:
Fax 2 Email
Study IT Online
Work from Home