China, South Africa new trade stats: it`s a whopper

China, South Africa new trade stats: it`s a whopper

Ties with China strengthen; time for Zuma to take next step?


China's total foreign trade with South Africa was up a whopping 77% in 2011 compared to the previous year, according Chinese statistics released this week.

China is South Africa's biggest trading partner. China's total foreign trade value with South Africa hit about US$45bn (about R363bn) in 2011, according to December's figures from China's customs authorities.


The figure confirms it was a well-timed move for China to include South Africa in its Brics (Brazil, Russia, India, China, South Africa) club last year as developed markets headed into a series of economic crises.

South Africans and others on the African continent can expect to enjoy cheap Chinese goods for some time yet, as China and South Africa continue to bed down their blossoming political relationship - and China actively encourages trade with emerging markets.

The bad news is that it is likely to remain difficult for South African manufacturers to compete with Chinese imports.

China is the world's largest exporter and, after the US, its largest importer.

China's General Administration of Customs (GAC) said on Tuesday that the country's total value of trade was up about 23% in December year-on-year, to a record US$3.6trn - an incredible achievement when you consider we are in the midst of the worst global economic recession in not far off a century.

The EU remains China's top trading partner ($567.21bn; up 18% year-on-year), while the US is its second biggest ($446.65bn; up 16% year-on-year). But, this picture could easily change in the long run.

Trade with fellow Bric nations grew at a much faster pace than China's trade with other partners. GAC data has trade with Brazil rising by about 35%, with Russia at around 43% and with South Africa at a staggering 77% last year.

China's exports still growing

China imports less than it exports, though its imports increased by about 25% in 2011 to US$1.74trn (2011 exports: US$1.9trn), reveal the latest statistics.

The Chinese government is under pressure to rebalance the figures and has spoken about doing more to encourage domestic consumption and imports.

China's exports increased by about 20% last year. Exports increased by about 30% in 2010 compared to the previous year, so appetite for Chinese goods has tapered off.

This slight slowdown in China's export growth rate has been taken by some market watchers as a good sign. They reckon the figures will encourage the Chinese authorities to take action to boost the economy, which in turn will drive imports of resources - which is good for the values of resource company shares in Africa and elsewhere.

Chinese manufacturers have been struggling in recent months for several reasons. These include the economic crises in their core customer markets in Europe and the US, a stronger Renminbi making their goods look more expensive and rising labour costs.

African countries that aren't too fussy about quality are welcome trade diversifiers for China in times like these.

But, even after the financial storms have passed in the US and Europe, as they eventually will, we can expect cheaply manufactured Chinese produce to continue washing up on our shores.

New manufacturing competitors for China

European leaders like France's Nicolas Sarkozy are emphasising the need to re-establish industrial production. This would be part of the effort to charge up the French economy, which in turn suggests competition for Chinese exports.

US presidential hopefuls are also talking up the importance of home-grown manufacturing efforts.

Negative sentiment towards China is up, thanks to beleaguered citizens being reminded that China's biggest export to the US in recent years has been unemployment.

Fresh competition from Europe and elsewhere is unlikely to derail China's manufacturing sector.

Although China is seeking to move up the value chain with its products, there is still a vast, unskilled population needing jobs.

As China moves its economic initiatives west to less developed areas, it seems inevitable that lower end manufacturing will pick up in those areas where Chinese labour is cheapest.

Environmental pollution is becoming an issue for China's authorities.

But, with millions of hungry mouths to feed and the political situation looking increasingly precarious for totalitarian rulers the world over, China's rulers will most probably turn a blind eye to culprits where there is job creation in high unemployment areas.

It is a pity Africa's leaders aren't doing more to ignite our own China-style industrial revolution with a view to boosting employment among un-skilled and semi-skilled labourers.

Credit for the deepening ties between South Africa and China must presumably go to President Jacob Zuma. It is surely no coincidence that the burgeoning relationship took off from the late 2000s, around the time Zuma rose up the political ranks to the highest office.

Perhaps it is time for South Africa's leader to seriously consider our own special economic trading zones, with cushy perks and financial deals for African operators who create jobs - just as China has done for its own?

We're way behind in the dust in Gross Domestic Product terms compared to China and the other major emerging markets, but it isn't too late to play catch-up.


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Pickvest: Billionaire gets five years to repay investors

Pickvest: Billionaire gets five years to repay investors

18 000-odd investors may have till December 2016 to see if the rescue plan works.

Investors in Pickvest’s eight syndication schemes may have to wait until December 2016 to find out if a rescue plan has been a success. That’s when apparent property billionaire Nic Georgiou and his associates have promised to repay the R4.6bn that was invested in the schemes.

In December last year, Pickvest’s investors approved a business rescue plan proposed by practitioner Hans Klopper. About 11 000 of Pickvest’s total 18 000-odd investors voted. More than 99% of those who voted were in favour of the rescue plan.

Unlike the plan proposed by Sharemax, Pickvest’s rescue does not require court approval.

In terms of the plan, all the properties that were supposed to be owned by investors will be transferred into a public company called Orthotouch. This company has three directors: Nic Georgiou, Panos Kleovoulou and Jannie Nel. It is envisaged that Klopper and corporate lawyer Connie Myburgh will also be appointed directors.

The vast majority of Orthotouch’s shares will be owned by the NAG Trust, registration number IT4469/09.

Orthotouch has undertaken to pay investors a monthly return starting at 6% per year and increasing by 25 basis points each year. At the end of five years, Orthotouch promises to repay investors their full R4.6bn.

The rescue plan is significantly less attractive than the original terms on which investors bought their shares. For example, investors in the biggest syndication, Highveld 21, which accounts for R1.3bn, were promised a return of 12.5% and a capital “guarantee”. Thus, investors may still be inclined to lay complaints against their financial advisers with the Fais Ombud.

Klopper says that Orthotouch has pledged its shares to the eight syndication companies, which will remain the property of investors. “If there is any breach of the agreement, the syndication companies can exercise their pledge and take control of Orthotouch,” Klopper explains.

But Klopper is also the first to admit that the rescue plan has a significant risk attached to it.

Orthotouch will only be able to pay investors their monthly income if it succeeds in its efforts to borrow money. In a letter to an investor, Klopper explains that Orthotouch was unable to make contact with financial institutions during the holiday period, and this caused a delay in the payment of interest.

Klopper says that Orthotouch needs to borrow money in order to pay investors and to improve its buildings, some of which are in dire need of an upgrade.

As a public company, Orthotouch’s financial statements ought to be open to public scrutiny. However, since it is a newly-formed company, it may take as long as 18 months before investors will be able to see audited financial statements.

Such financial statements, when they are produced, should provide insight into Orthotouch’s ability to meet its promises to investors. If the company appears healthy, investors in the eight Pickvest syndication companies may have a better chance of selling their shares and redeeming their investment early. At present there are virtually no buyers for these shares at any price.

In the past, Pickvest used to assist its investors to sell shares in the second-hand market. There is no reason why this market should not resume. Elderly Pickvest investors may be willing to sell their shares for a substantial discount and let younger speculators – with more time and stronger stomachs – wait until December 2016 to see if Orthotouch can deliver on its promises.

Klopper says that a trading platform “May very well be something that could be considered”.

Buy, buy, buy say estate agent bosses

Buy, buy, buy say estate agent bosses

The gap between buyers and sellers is narrowing favouring even the entry level buyer.

Several property specialists have indicated that 2012 is the year to take the plunge and invest in that property you have had your eye on, even as a first time buyer.

Auction Alliance CEO, Rael Levitt, says the residential property market has reached equilibrium making the next 12 to 18 months an ideal time to invest. Explaining the concept of equilibrium, Levitt says “when supply and demand are equal, ie, when the supply function and demand function intersect, the market is at equilibrium.” Levitt says since house prices have dropped and little newly built stock is entering the market, the demand is trickling upwards with the marketplace showing good value.

Craig Hutchison of Engel & Völkers concurs. He says the gap between buyers and sellers is closing with home owners recognising on some fronts that unrealistic asking prices will not lure purchasers. Hutchison says there has been a tendency by sellers to hold on to their properties hoping to realise unrealistic returns which were the hallmark prior to the global 2008 subprime crisis.

Levitt says after three years of dwindling sales and slumping prices, 2012 appears to be the year to invest in property. “Although the market may weaken slightly this year, the market is now bumping along the bottom which means from a long term investment perspective this is the time to buy.”

The MD of Chas Everitt International Property Group, Berry Everitt has added his voice to those saying the current market is a buyers’ one, but says that sizeable deposits have proved to be a significant obstacle.

He suggests pooling resources to overcome this barrier at a time when interest rates and house prices are low and affordability is up. Everitt suggests the formation of an investment group to put up a deposit and share other costs while letting the property to cover the bond. Obviously the process will have to be carefully managed from a legal point of view.

Household and property sector strategist at First National Bank, John Loos, says while it is difficult to say when it is a good time to buy or not, “it’s becoming a better time to buy”. He points out though that people thinking of buying property must keep in mind possible interest rate hikes. Loos says cost hikes in municipal rates and utilities like electricity must also be considered. “…one needs to buy well within your means to allow for those very significant cost increases in future”, Loos said.

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Levitt maintains that 2012 will most likely see further house price lethargy but that this opens the window of opportunity. “This may appear to be a contrarian view which flies in the face of the persistent gloom that has nagged the residential market since 2008, when the subprime crisis flared globally. It has become increasingly apparent to us that the pieces for a housing rebound will eventually fall into place.”

He points out that while a slow recovery could be derailed, the market finally seems to be regaining some measure of normalcy after a few years of weak prices and the volatile impact of foreclosures. The normalcy being the equilibrium between the demand and supply of housing. Levitt concedes that while it is early days to predict a rebound in 2012, transaction volumes appear to be improving.

“With the exception of really hard-hit markets, such as leisure property, the vast majority is ready to turn around. This isn’t going to be one of those spiked robust recoveries but if entry level buyers want to get into the market, this is a good time.

“I think that the hysteria of the boom is now well and truly over. We are back to the natural forces of the market and that means that just like our parents and grandparents (who) saw slow and steady growth in house prices, we will see the same. If you have a long-term pragmatic view of residential property investing, you will realise that the only trajectory is now upwards and the timing for investment over the next 12-18 months could not be better,” Levitt concluded.

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First time home buyers spur demand in 2011: FNB

First time home buyers spur demand in 2011: FNB

Expects household saving to improve noticeably in 2012.

FNB's Estate Agent Survey has found that an increasing number of first time buyers are able to produce the money required for deposits and transfer fees, leading them to become a more significant source of residential demand in 2011.

John Loos, household and property strategist at FNB Home Loans said that the survey showed the changing behaviour that was beginning to happen in the household sector.
First time buyers had become far less significant in the home buying market around recession time, dropping to an estimated 15% of total home buyers by 2008, according to the sample of agents surveyed at the time.

However, according to FNB, the past three years have seen consecutive increases in the first time buying percentage, with a very significant jump from 17% in 2010 to 23% in 2011. This was the highest first time buying percentage since 2005. However, one should bear in mind that overall home buying volumes were far lower compared with 2005/6, so this percentage still represented a far lower overall number of first time buyers compared to then.

Nevertheless, the percentage improvement over the past 3 years was partly reflective of improved first time home buyer confidence. Confidence alone was an important factor in driving first time buyer demand.

Unlike established households, for whom having a home was often a more urgent and pressing matter, many young first time buyers have had the flexibility of remaining in the rental market until such time as economic or interest rate conditions improved, or alternatively postponing their departure from their parents' home.

It should therefore not be too surprising that the recovery in the first time buying percentage lagged the overall market recovery somewhat, with a portion probably choosing to adopt a "wait-and-see approach, but were now (rightly or wrongly) more encouraged as the memory of recession and high interest rates fades.

In addition, it was true that banks had relaxed their credit criteria gradually and mildly since 2008, which was crucial for first time buyers in a country which has an extremely low savings rate that makes deposit requirements troublesome for many.

Loos did point out however, that FNB believed household saving would improve noticeably in 2012, and indeed in the housing market some agents were already starting to see signs that this was happening. Higher savings rates were a far more desirable solution to the home loan deposit constraint than merely relying on banks to relax credit criteria.


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Predictions for 2012`s property market

Predictions for 2012`s property market

Shanghai, Mumbai, Hong Kong and Geneva are tipped to fall by between 10 and 20%.

Property prices in prime central London went from strength-to-strength this year, but 2011 was more turbulent for the wider UK market. There was also a divergence between the performance of prime markets around the world, as the global economic uncertainty weighed heavily on particular markets. Knight Frank’s research team set out what is in store for 2012*

Prime global housing markets

Liam Bailey, Head of Residential Research, said: “Growing global uncertainty and government intervention in the property market, especially in Asia, will weigh on prices in some areas. But some cities, such as Moscow and Bangkok, will shrug off these concerns to register growth of between 10 and 20% in 2012. Paris, Kiev and St Petersburg are all expected to rise by 5 to 10%, with London slotting in next with a rise of 5%.

However, Shanghai, Mumbai, Manama, Hong Kong and Geneva are tipped to fall by between 10 and 20%.

UK house prices

Grainne Gilmore, Head of UK Residential Research, said: “After rising by around 1.3% this year, Knight Frank forecast that mainstream UK house prices will fall by 5% in 2012. Once inflation is taken into account, this will result in a deeper fall in real terms. There will be regional differences in house price performance however, with the south East and London holding up better than the North of England.

“We expect interest rates to remain low, which will support the market to some extent, but we still see prices falling as a "perfect storm" of deteriorating economic performance, public sector job cuts and lack of mortgage lending hits activity and prices.”

The Knight Frank research team expect prime country house prices to slip by 2.8% next year. They fell by 1.7% in the year to September. It is a different story in Prime Central London however, where prices have risen by more than 12% in the past year alone. We expect further rises next year, albeit on a slightly more modest scale, climbing by 5%, with cumulative growth of 24% by the end of 2016.

Read the full UK forecast here: http://my.knightfrank.com/research-reports/uk-housing-market-forecast.aspx

English Farmland

Andrew Shirley, Head of Rural Property Research, said: “This exuberant asset class slightly underperformed by its own heady standards - prices have trebled in the past 10 years - with annual growth of just 4% in 2011, following slight drops in the final two quarters of the year. But we expect the market to get going again in 2012 and predict values rising by up to 7% over the year.”


* This report was prepared by Knight Frank: www.knightfrank.com

Special Report Podcast: John Loos - household and property sector strategist, FNB - Boardroom Talk with Alec Hogg

Special Report Podcast: John Loos - household and property sector strategist, FNB - Boardroom Talk with Alec Hogg

ALEC HOGG: It’s Monday January 9 2012 and in this Boardroom talk special podcast, John Loos from FNB, joins us. The Property Price Index is one of the areas that many people keep an eye on but you do it for a living, John.

JOHN LOOS: I enjoy it, Alec, I must say, it’s one of the more cyclical sectors, so it’s gives an economist much entertainment along the way.

ALEC HOGG: Things looked okay in 2010, we were actually moving in the right direction but that seems to have come off the rails a little.

JOHN LOOS: Yes, not entirely surprising, Alec, if you look at the big stimulus behind 2010, globally there were huge interest rate cuts by the US Federal Reserve, a lot of QE1 and QE2 a little bit later. So, big stimulus packages to get the world economy out of recession. That brought our economy out of recession too, we had big interest rate cutting in 2009 and so really the property market…that mini recovery in 2010 tracked the global and local economic recovery and now it’s tapered off, it’s flattened out just like the world economy.

ALEC HOGG: So what was the bottom line in 2011?

JOHN LOOS: Well, 3.1% house price growth on average. That’s down from the 6% growth of 2010. In real terms that would be negative, given that inflation is probably going to be closer to 5% for the year. So, yes, very flat, negative real house price growth and I think it’s a reflection of weak economic times, the lack of interest rate stimulus and a household sector that’s still highly indebted and needs to rebuild the balance sheet.

ALEC HOGG: Sounds like we had our double-dip in the housing market.

JOHN LOOS: Well, not quite, yes, I guess you could possibly call it a double-dip if you take real house price declines as a double-dip. But it’s pretty normal in property markets to get that…after a big slump you get what they call a relief recovery, that was 2010 and then you go into a long period of stagnation as a lot of the excesses get sorted out, the oversupplies in the property market, the household sector indebtedness. So, it’s nothing abnormal and the big cycle in residential property is probably 15 to 20 years on average. We’re only about 13 years into it, so there’s probably a few years to go of this stagnant behaviour.

ALEC HOGG: Give us a better idea on that, John, if you would. You did say a long cycle, if we’re 13 years in and it’s 15 to 20 years, are we saying then another seven years of gloom?

JOHN LOOS: Well, yes, 20 would probably be the outer limit in most cycles but yes, I’d say somewhere between the 15 and 20 years. When I believe that property will be ready to do well again is probably after the next interest rate hiking cycle, whenever that may occur. So that’s probably still a few years away, we’ll go through something of a rate hiking cycle and then the next…after that when interest rates are cut again I think by that time the household sector will have rebuilt its balance sheet and be able to respond more positively in terms of residential demand to the stimulus.

ALEC HOGG: If I’m reading you properly then, the earliest one can expect things to start improving in the housing market would be around 2015?

JOHN LOOS: I think that’s at least what it would take and especially if you look at what’s happening in the world economy, which affects us, and how long it might take to sort out some of its excesses, I think at least 2015, the latter half of the decade looking for some sort of decent recovery.

ALEC HOGG: So, John, if you’re holding on to a house in the hope that in some point in time you’ll be able to sell it off, perhaps it’s best just to take your medicine now?

JOHN LOOS: Yes, I never like to tell people to sell, it’s probably a bad time if you don’t have to sell but if you’re under financial pressure and you’re holding on for some sort of imminent recovery, I have my doubts. I think it’s a good few years away or a good few years of very flat performance.

ALEC HOGG: So, if you are a buyer on the other hand, no need to rush.

JOHN LOOS: No need to rush, we’re about 17% down in real terms from the real price peak in early 2008, so it has become a better buyer’s market. But my perception is that residential yields on average are still relatively low and that the best buying opportunity and the best investment opportunity, if you’re looking for yield, is probably still a few years away.

ALEC HOGG: That’s interesting, so you’re not even suggesting that it’s a good time to buy for rent?

JOHN LOOS: Well, not the best time. As I say, I think it’s improving, I think rental growth is probably outpacing very weak house price growth and that would mean that I believe yields are probably widening on average. It’s always difficult to time the bottom of a cycle but no, I think the best buying opportunity for the property investor who buys an income stream is probably a few years off.

ALEC HOGG: You also have at FNB a Valuers Market Strength Index, what does that mean?

JOHN LOOS: Well, every time a valuer of ours does a property valuation we ask them to rate demand and supply in the market in that area. It’s a very simple one, good, average or weak and we give a number rating to each. Then what we do to determine the market strength index is we subtract the supply rating from the demand rating. I’ve calculated on a scale of nought to 100 very similar to a Purchasing Managers Index, I guess, and the level of 50, below 50 means that the supply rating is higher or stronger than the demand rating. Since 2008 it’s been consistently below 50, which means that it’s a relatively over-supplied market according to the valuers as a group.

ALEC HOGG: So, it’s still a buyer’s market in other words, you get a better deal if you’re a buyer if that index is below 50 and where is it at the moment?

JOHN LOOS: It’s down at about 44 or so. So, yes, that’s as I say 50 would be the break-even where demand would be equal to supply and it’s been consistently below that.

ALEC HOGG: Has it been worse than 44?

JOHN LOOS: No, last year was the worst it’s been. So, yes, unsurprisingly we’ve resumed real house price decline.

ALEC HOGG: Again, if I’m reading you correctly, that doesn’t mean that the worst is behind us, in fact it could still be ahead.

JOHN LOOS: Absolutely Alec, a lot of the housing market’s fortunes have to do with the world economy. If you’re a Nouriel Roubini double-dipper of sorts then you would think that significantly worse has to come. Now it’s tough to call a recession or a Great Depression or whatever certain people are predicting but I think the global economic risks are very high, we know what’s going on in Europe and I don’t believe that the US is out of its troubles yet, you can’t just borrow and spend your way to recovery. So, there are a lot of risks in the world economy, the risks of further recessions over the next few years I think are very significant and yes, therefore I think the downside risks to local residential property are also very significant.

ALEC HOGG: And all of those have knock-ons, as you’ve just explained, in South Africa.

JOHN LOOS: Absolutely, the world economy affects us; our exports from this country are near to 30% of GDP in value. So, we’re an open economy, we are highly exposed to what happens in the world.

ALEC HOGG: That’s the bigger picture, it’s not terribly exciting but when you look specifically at 2012 is there anything we need to look out for there?

JOHN LOOS: Well, I’m assuming some sort of very slow positive growth carrying on…like we have in the last few quarters, perhaps just above 1%. Slow economic growth for this year and slow nominal house price growth, I’ve penciled in about 2%. That’s lower than an inflation assumption of nearer to 5%, CPI inflation that is. So, another real house price decline I believe for this year but slight nominal house price growth.

ALEC HOGG: If it’s only 2%, as you mentioned earlier it was 3% in 2011, so we aren’t just bumbling along the bottom, we might even, in real terms, be sliding a little.

JOHN LOOS: Yes, I think more slide in real terms is…that’s my expectation. Housing markets struggle to…it would take a more serious economic crisis to warrant a nominal house price decline. One tends to find, in the housing market, resistance to dropping prices; I think it’s got to do with the nature of the beast. Housing investment for many people is the biggest investment they’ll ever make and so they are incredibly resistant to dropping prices. So that’s why you see a lot of the correction in housing markets happens in real terms, I guess it’s the inflation illusion, the CPI inflation illusion that causes it but people are much more reluctant to drop their prices in nominal terms.

ALEC HOGG: John, often black swans arrive, things come out of the ether to either surprise us positively or negatively, what would it take to turn all of these trends on their heads? What would it take to actually push the housing market up again?

JOHN LOOS: Alec, I think what’s needed and I’m thinking like a macroeconomist now, can’t get away from that and I think what we need fairly soon is a very significant drop in certain commodity prices globally and the one obviously being the oil price. At current levels one feels that that must put significant pressure on the world’s biggest oil guzzler, being the US. If one had a very significant commodity price slump I think that’s what would be needed to avert a serious global economic slowdown and possibly even start some sort of global economic recovery, better economic growth times for us and therefore possibly a better housing market performance. But failing that and if we carry on with very mediocre economic growth I don’t think the SARB can realistically cut interest rates aggressively, we might get one or two more minor reductions this year, that’s not going to make a big difference and the household sector really needs to reduce its debt/disposable income ratio. So, it can do that either by very strong economic and disposable income growth or failing that it just has to cut back on the spend and reduce the growth in borrowing and de-leverage that way.

ALEC HOGG: And where are we on the debt/disposable income ratio?

JOHN LOOS: Well, round about 75%. That’s down from, if I remember, around 83% when we started at the all time peak in early 2008, so it’s been slow going in reducing that ratio and that’s normally the case when you’ve got slow economic growth. If we had the rapid economic growth of China or if we just had 5% or 6% economic growth, which we had a number of years ago, you could probably see that ratio declining faster but the reality is we’re hovering just above 1% economic growth, so you don’t grow your way away from high debt ratios easily.

ALEC HOGG: And where would we need to get to before conditions are correct for another housing boom?

JOHN LOOS: Well, that’s debatable but I think to be comfortable we’ve got to be significantly below 70%, I think down into the low 60s and we’d probably find a household sector that’s a lot more comfortable and a lot more ready to accelerate its borrowing growth once the stimulus comes again and the stimulus would be the next round of interest rate cutting, after the next round of interest rate hiking I believe.

ALEC HOGG: So that’s some years off, your advice for people right now?

JOHN LOOS: Well, it’s always difficult to say now is a good time to buy or now is not a good time to buy, there’s no perfect timing. It’s becoming a better time to buy but I think what’s more important is if people are buying property is to think about the following, firstly interest rates always do go up, it’s almost as certain as death and taxes and our typical interest rate hiking cycle has been four to five percentage points, if you look at the last two. So, you’ve got to make provision for a significant number of rate hikes when they ultimately do come that would be prudent. Then secondly it’s very important to take into account the very significant cost hikes being imposed on us by municipal rates and all the utilities, with Eskom leading the charge, it’s going to be a lot more expensive to…or those are going to be a lot more expensive in years to come. So, one needs to buy well within your means to allow for those very significant cost increases in future.

ALEC HOGG: John Loos is the household and property sector strategist at FNB.


The PODCAST of this interview can be downloaded on the MONEYWEB website.

Banks appetite for lending will decide how property performs: expert

Banks appetite for lending will decide how property performs: expert

Consumers warned not to expect too many interest rate concessions.

The residential property market in 2012 will continue to be driven by the banks and their varying appetite for lending.

Rudi Botha, CEO of mortgage originator Betterbond, said lending volumes that prevailed in 2011 would most probably be maintained for most of this year despite the possibility of more competition among banks for certain clients.

He noted that currently new mortgage lending totalled about R7.5 billion a month, and further advances about R2.5 billion a month - with about 25% of these loans being obtained through Betterbond.

In addition, Botha said, consumers should not expect too much in the way of interest rate concessions in 2012.

"The situation now is quite different from a few years ago, when borrowers in good standing could with relative ease secure a rate that was one or even two percentage points below prime rate. These days most loans that are approved are at prime (currently 9%) and then in most instances only if the borrower can pay a 10% deposit.

"However, the good news in this regard is that most lenders are currently credit-scoring potential borrowers to allow for a one or two percentage point increase in interest rates in future, which means that those who are approved for loans should have the financial resilience to cope with such an increase without defaulting and running the risk of losing their homes."

He also pointed out that the requirement for most homebuyers to pay a deposit of at least 10% offered protection against the possibility of negative equity for both individual borrowers and the real estate market in general.

"And we believe this is prudent in the face of the ongoing turmoil in the world's financial markets."

On the other hand, Betterbond is not expecting any increase in interest rates until perhaps the end of 2012 "and this, together with even modest wage and salary increases, will further increase the affordability of home ownership for many people."

As for the real estate industry itself, Botha said economies of scale and cost savings on shared services would be the main drivers for further consolidation among real estate agencies.