Thursday, 1 November 2007

U.S. Subprime Mortgage - Boom or Bust for S.A. Home Loans Markets


I'm assuming that most of the people that read this BLOG are either Property Guru's or Financial Barons so if I talk about the U.S. Subprime Mortgage problems that have been going on for the last month or two you're most likely up to date.

If not take a quick read through: Economist.com

The question that's been on everyones minds is; Will the U.S. Subprime mortgage lending crisis effect South Africa's mortgage market? Personally, I don't think so and so far it hasn't. If anything we've been one of the few fortunate countries that haven't been affected. We're fortunate enough in South Africa, that our securitization mortgage market is alot smaller than our bank lending market. Their are very few companies in South Africa that use securitization as a means of supplying funding i.e. SA Home Loans, Eagle Bond Originators, Rudco Finance and now Integer Bond Originators but there's still alot of scepticism amongst South Africans and the majority still prefer using the major banks.

If anyone has experienced the dip in either the U.S. market or if anybody thinks this is still yet to affect us please comment below.

WizardMan Out!

5 comments:

Christopher said...

Hey bud,

Won't you please drop me an email on chris[at]imod.co.za or GTalk me on chrismills123[at]gmail.com - I need to ask you for some property help if possible.

Thanks a million!
Christopher

Anonymous said...

You don't think the subprime mortgage melt down will affect the SA housing market? Really ? I live in the US but ABSA bank approved a R950 000 mortgage to a friend of mine [lives in the US] with no money down and very little proof of income ... sounds like risky lending to me ... coincidently the strengthening of the rand is making his R10k repayments difficult ... SA median home prices have doubled over the last 5 years and there are many speculators in that market... just my opinion, but I think there is substantial risk to the downside.

WizardMan said...

H Anonymous,

Was this prior June or after June.
Reason I ask is this has been South Africa's problem over the last couple of years.

That's why they've brought in the new credit act, to curb reckless lending of credit.

You're 100% correct about the home prices having shot through the roof, but prices have begun to slow down and it's not only due to the stregnthing of the rand but the fact that interest rate hikes have jumped up from 10.5% to 14% in 8 months.

Our market is taking some strain but this is mainly due to our inflation rates jumping through the roof.

Anonymous said...

Wizardman ... he bought the property in July 2007...and by his own account, the person[s] facilitating his loan were turning a blind eye to the new industry standards [they told him as much]... I also speculated in the South African real estate market a few years ago and probably got out to early [2005]...we can all hope for a soft landing, but that clearly is not the case this side of the Atlantic ... if anything, the SA housing market is/was as speculative as the market here.... just my 2c.... figure out a way to short it :) ...anonymous NYC

WizardMan said...

Hi Anonymous Again :)

Thanks for replying again. I totally agree that alot of the real estate buying in this country over the last couple of years has been speculative.

We're lucky though in the sense that we've managed to curb the increase in property prices relatively quickly.

We're also lucky in the sense that South Africa does not run it's home loans on sub-prime mortgage lending. Most of the financing is done via the banks and I think they're the ones who've come to the fore and said, WHOAAAA!

Too many people lending too much money for over priced properties and we're putting a stop to it now!
Hence the new credit act. BUT you are correct, people will be bitten and there will be a SLUMP in the market.

Good though, means I can finally buy a place :)