Standard Bank grabs crown in home loans

Standard Bank grabs crown in home loans

Standard Bank has overtaken Absa to become the mortgage bond market leader in South Africa, increasing the size of its home loan book to R275 billion from R244bn over the past 18 months.

Steven Barker, the head of home loans at Standard Bank, said yesterday that the lender had an overall market share of 32 percent at the end of last year, compared with about 27 percent previously, and it financed about one in three of all new mortgage advances.

The growth in Standard Bank's mortgage loan book is related to it writing a lot more business because not all its bank competitors, particularly Absa, have had as strong an appetite as in the past for providing mortgage finance.

Reserve Bank data showed that at the end of January last year Absa was the market leader with 30.57 percent of new mortgage advances, followed by Standard Bank (30.7 percent), Firstrand (18.48 percent) and Nedbank (16.83 percent).

Standard Bank has grown its mortgage bond book at a time when there has been a slump in the property market, resulting in a contraction in the number and value of home loans approved and granted.

Barker said that new mortgage advances totalled R360bn in 2007 but only R120bn in new mortgage advances were granted last year.

The strong growth in Standard Bank's mortgage bond book had demanded that it spend a lot of time understanding the risk of loans granted and pricing these loans appropriately to take into account the risk, he said. The bank still provided 100 percent loans for houses under R1.5 million, particularly to its own banking customers and people with lower risk, but it was more selectively than in the past.

However, Barker said that the bank generally needed a 10 percent deposit for loans of more than R1.5 million and expected a 20 percent deposit for loans greater than R2.5 million.

Barker said foreclosures of mortgage bonds were still high but were starting to move in the right direction.

Non-performing loans were declining although the bank would like this to happen faster but the property market was not providing a major underpin to allow distressed borrowers to exit the market.

Barker said the level of prepayment of mortgage bonds was lower than in the past, which was indicative that the purchasing power of consumers was being eroded by the steady incline in consumer price inflation and the strain households were still under to reduce debt.

Prepayment refers to households paying more than the minimum monthly repayment amount on their mortgage bonds. Barker said the only reason many households could afford to carry their current debt levels was because interest rates were low.

Sibusiso Gumbi, a home loans analyst at Standard Bank Research, said the deleveraging of household debt was continuing but at a snail's pace and household debt to disposable income was still not far off the peak of 82 percent.

Gumbi said the country's poor economic growth outlook, coupled with feeble economic consumer confidence and rising inflation, painted an uninspiring outlook for consumer spending and house price growth this year was likely to mirror this.

He said house price growth remained fairly muted last year, with Standard Bank's median year-on-year house price growth negative at minus 0.5 percent in December.

Business Report

Commercial properties beat the market

Commercial properties beat the market

Directly held commercial property outperformed equities and bonds in South Africa last year.

The SA Property Owners Association's property index, International Property Databank (IPD), released yesterday, showed property unit trust listed property funds achieved a return of 12.2 percent and directly held property posted a 10.4 percent return last year, compared with 2.6 percent for the equity market and 10.1 percent for bonds.

South Africa's overall commercial real estate market achieved modest growth last year, with a 10.4 percent return.

Uncertainty in global markets, weak local demand and slowing consumer confidence resulted in muted capital growth of only 1.4 percent while income returns were steady at 8.9 percent.

The index is based on a sample of 2 017 properties with a capital value of R204.8 billion at the end of December.

IPD South Africa managing director Stan Garrun said yesterday that the results confirmed the impact of global economic instability and subdued conditions locally on real estate investment performance.

He said high operating costs and a serious mismatch between demand and supply were taking their toll on returns.

"While these figures do not necessarily point to further recessionary conditions, they do indicate that it is a long haul back to pre-2008 levels. The good news is that prime assets are performing well in all sectors. Any economic uplift should quickly release major new income growth for both tenants and landlords, as well as a pent up property development pipeline," he added.

Garrun said fundamentals were placing downward pressure on rentals and bottom line returns even at national level and vacancies rose from 6.6 percent to 6.9 percent, rental growth reduced to 6.2 percent and rental yields softened by 36 basis points to 9.6 percent.

Retail property achieved the strongest capital growth of the three main sectors for the third consecutive year with a 10.1 percent return, comprising an 8.3 percent income return and 1.6 percent capital growth.

The office sector produced a return of 11.2 percent, comprising 1.3 percent capital growth and a 9.7 percent income return. Industrial property managed a return of 11.9 percent, with a 10.4 percent income return and 1.4 percent capital growth.

Business Report

Public input invited for new Rental Housing Bill

Public input invited for new Rental Housing Bill

The public is invited to respond to the redrafted Rental Housing Bill that was introduced on October 28, 2011, in the National Assembly.

The portfolio committee on human settlements met twice to consider submissions, and after much debate, had the Bill redrafted.

Written submissions must reach the committee secretary by 4pm next Thursday, April 5, 2012, with public hearings in parliament scheduled for April 24-25.

A public notice issued by Beauty Nomhle Dambuza, MP and chairwoman of the Portfolio Committee on Human Settlements states, among other things:

"The Portfolio Committee on Human Settlements had embarked on the process of redrafting the Rental Housing Amendment Bill. During the process of public hearings and oversight visits, the committee had witnessed irregularities in the rental sector.

"The committee is of the opinion that the Act should address the challenges the country faces in respect of the rental sector. Therefore, the committee invites all interested persons and stakeholders to submit written comments on the redrafted Rental Housing Amendment Bill, which must reach the committee by 4pm on Thursday, April 5, 2012."

This time around the Bill proposes more radical changes and with focus on tenants' experiencing economic hardships. Below are some of the e-mail changes envisaged and the possible reasons for these changes and intended outcomes:

The introduction of rights and obligations in the heading. Instead of relations between tenants and landlords, it will read "rights and obligations of tenants and landlords". It is not only what parties expect as their rights, but also what they need to give (obligations) to make their relationship successful. Rights therefore exist together with obligations.

Membership will change to seven. A provincial tribunal will function as two committees, each with three members. This will allow tribunals to conduct two hearings, even simultaneously, reduce case backlogs, register a greater number of complaints and reach out to more areas within a province.

Members do not have adequate knowledge, skills and training to perform the tribunal's dispute resolution tasks. The proposed changes will make it the national government's duty to fund programmes to train members and staff of the tribunals. This is essential for tribunals to perform more efficiently, provided the programmes are developed with great care. Several "courses" in the past were more cut-and-paste of legal issues and the reproduction of the Act.

The common-law position of leases will change. Where the common law allowed parties the choice to enter into a lease orally or in writing, all leases must be in writing. A simple pro-forma lease agreement in 11 official languages will be part of the proposed changes. It must also contain "minimum requirements for a lease agreement which may be used as a guideline by the tenants and landlords".

"Landlords must maintain the structure of and provision of utilities to the dwelling." This changes the right landlords had through contract law to pass over their common-law obligations.

Each province must have a Rental Housing Tribunal and all local municipalities are required to establish rental housing information offices. In terms of section 14 (3), the following would be the functions of the information offices:

(a) educate, provide information and advise tenants and landlords on their rights and obligations in relation to dwellings in its area of jurisdiction;

(b) provide advice to disputing parties on reaching solutions to problems relating to dwellings;

(c) refer parties to the tribunal;

(d) comply with any request of the tribunal in terms of section 13; and

(e) keep records of enquiries received by the office and to submit reports in relation thereto to the tribunal on a quarterly basis.

As for poor tenants, the proposed addition includes intervention by national government, making it compulsory for the minister to:

(a) monitor and assess the impact of the application of this Act on poor and vulnerable tenants; and

(b) take such action as he or she deems necessary to alleviate hardships that may be suffered by such tenants.

(6) For purposes of subsection (5), the minister may define criteria based on age, income, or other form or degree of vulnerability that apply to such tenants or group of tenants, and amend or augment the policy framework on rental housing referred to in subsection (3) in such a manner as he or she sees fit."
Written submissions for the Rental Housing Amendment Bill (B21-2011) or enquiries should be made to Koliswa Pasiya at kpasiya-AT-parliament.gov-DOT-za, or by telephone at 021 403 3725, 083 709 8495 or fax 086 666 0984.

Daily News