The Article below emphasizes the importance of the housing market to the overall health of the economy. However, there are also two Articles on Moneyweb detailing the problems experienced by banks in lending and, in particular, the impact of Basel III on their ability to lend.
The first article entitled South African banks tighten lending can be found HERE:
The second article, which relates more to unsecured lending and is entitled How big of a problem is unsecured lending for banks? ... can be found HERE.
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'Housing inertia hobbling economy'
The South African economy would not recover unless there was a recovery in the housing market because building was an engine for growth and wealth creation, BMI-Building Research Strategy Consulting principal consultant Llewellyn Lewis said yesterday.
However, mortgage advances in current values dropped 57 percent from R440 billion to R218bn between 2007 and 2009 and it could take a decade or more for mortgage advances in current values to reach the same level as the peak in 2007, Lewis said at a building, construction and property industry forum in Johannesburg.
Nonetheless, mortgage advances had increased by 314 percent between 2000 and last year, he said.
Lewis referred to the structural shift in finance, with banks growing unsecured lending ahead of home loans and asset finance. This, he said, was because unsecured lending was more profitable, while new regulations discouraged banks from taking on long-term loans.
He expressed concern about the declining prominence of mortgage lending, which would make home ownership difficult and hurt fixed investment spending. He asked what the leadership of the industry was doing about this.
Standard Bank's head of home loans, Steven Barker, said yesterday that the capital and liquidity requirements on banks under the Basel 3 regulatory requirements meant there was more uncertainty about the consequences of long-term lending. This was constraining the appetite for mortgage lending, he said.
Barker said Standard Bank understood those risks. Providing mortgage finance to its client base was important, and it could not "stop-start" it.
The bank grew its home loan book by about 4 percent to R299bn in December last year from a year earlier and made grants totalling R34.5bn last year to raise its home loan market share to 29 percent from 28.8 percent, Barker said.
Absa has 26.6 percent of the market, Nedbank 20.7 percent and FNB 15.9 percent.
However, property analyst Lightstone said last year that the number of mortgage bonds issued fell to record low of about 9 000 a month in the third quarter from a peak of more than 50 000 a month in 2007.
Barker said mortgage bond foreclosures remained at historically high levels despite declining substantially since 2007. Overall mortgage defaults, which were regarded as being more than three months in arrears, were between 7.5 percent and 8 percent.
Lewis stressed the importance to the economy of investment in affordable housing.
He said investment in affordable housing was large at 40 million square metres of building a year, but the industry was tracking along at about 200 000 units a year.
The backlog would rise to 3 million units by 2020 at this pace of delivery, and the objective as a country should be to raise delivery to about 500 000 units a year. This would reduce the backlog to 1.3 million units by 2020, Lewis added.
"We are losing momentum and sight of what we should be doing and there is all kind of talk about upgrading squatter camps. The target must be the eradication of all slums or informal settlements by 2025."
Lewis said it was most likely that South Africa would follow a low road rather than an upper middle road scenario in affordable housing. "The difference between the high road and lower middle road could be R560bn and 940 000 jobs over the eight years to 2020. There is an incentive to do this if we had the guts," Lewis said.
Construction was growing at 9 percent year on year in constant values, he said.