The latest Consumer Credit Market report from South African National Credit Regulator states that around 75,000 property owners were in debt on contract repayments for around more than three months in June.
The biggest banks are taking longer to deal with home loan defaulters although they are continuously lowering their nonperforming home loan books from 2009-10 peaks, say industry players.
Steven Barker, the Standard Bank home loan head said that in the last week the bank’s percentage of nonperforming loans decreased from 6.2% to 4.9% of total advances in the year to June. However the reduction rate is not as quick as expected. He further said that it could become more difficult to deal with the concerned clients who have not yet been worked out of the system.
“It is rather difficult to manage the remainder of our non performing loan book as most of them are legal matters which have gone through either recovery or other private routes and are taking much long time to settle than expected.”
Mr. Barker said that he believes that it could take at least another two or three years to be free from SA’s threat of depressed property which is rather a matter of worry for consumers regarding their financial positions.
The report also states that the total mortgage debt were around R41bn, around 5.2% of total home loan advances of R799.41bn. According to the figures released by individual banks for their June financial reporting states the default level of 4% to 6%. It is a marked improvement on the 10% plus reported by banks in 2010, but it is still around the pre-crisis levels.
The Standard Bank research states that the sales volume are around 33% low on 2006-07 levels. “This can be the new normal scenario for the SA housing market for which the industry have to adjust.” said by Mr. Barket.
Jan Kleynhans - the CEO of the First National Bank Home Loans (FNB) is expecting the bank’s reduction of nonperforming loans to 21% in 12 months mo June to continue for the next year.
He agrees that this decrease is likely after that, as the remainder loans- mostly debt counselling and the failed matters are expected to take longer time to resolve as the legal processes are involved.
Mr. Kleynhans said that probably it would take around 18-24 months for FNB’s non performing loan book to gain back their normal levels of about 2% -3%. He also said that the demand of residential property was rarely to improve in the near term, considering SA’s fair low economic growth rate and “continuous and relatively high” household debt levels which were forcing the ability of the new consumers to take on new debt.
Property economist are equally straightforward regarding the house price growth. Jacques du Toit, the Absa housing analyst and John Loos, the FNB property strategist said that they expect a slower growth in next 12 months. 8.5% rise in house price were noticed in September year to year by Absa which is lower than 11% in the first half of this year.
Mr. du toit expected on an average increase of 9% for this year in the house price which can slow down to 6% next year. While Mr. Loos expected an average 6.5% growth in house prices this year and 5.7% next year, which is down from 7.3% previous year.
