Friday, 20 January 2012
Thursday, 19 January 2012
So a full pack of cards with the new announcement recently by ABSA about your favorite mortgage originator and your application - all bond
applications, effective January 2012, whether submitted by an internal ABSA source or by an originator will be treated the same.
This means that there will be no differentiation in LTV’s, whether a client applies directly to Absa or via an originator.
We welcome this announcement and believe that this is very good news for all Absa bank customers, real estate agents and originators. You will therefore now be able to submit applications, on behalf of your clients, to Absa within the following lending criteria:
Existing Absa Customers: Ordinary Loan Up to 100%
Existing Absa Customers: Further Advance Up to 85%
New Customers to Absa : Ordinary Loan Up to 90%
Vacant Land ( New and Existing Customers) Up to 60% - still low
Existing Absa Customers: Building Loan Up to 80%
New Customers to Absa: Building Loan Up to 65%
Existing Absa Customers: Affordable Housing -
Ordinary Loan Up to 100%
New Customers to Absa: Affordable Housing -
Ordinary Loan Up to 90%
Affordable Housing - Building Loan ( New & Existing
Customers) Up to 80%
Existing Absa Customers: Loans above R2.7m Up to 85%
New Customers to Absa : Loans above R2.7m Up to 70%
Absa’s decision will ensure that no Absa customer will be prejudiced in the way that their application is treated and it also enhances the value proposition that your bond originator brings to you.
Real estate agents and lead providers can now, once again, look forward to using the one-stop service that originators offer and stay abreast of their client’s bond applications.
Well done ABSA, this is in line with Standard Bank and FNB.
Did you know? Buying UK Property has never been better.
There are actually currently 6 lenders available with home loan products available at 80% LTV and one offering even more!
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Monday, 16 January 2012
So what do you think is happening in the property market in SA - is it paradise to come?
This is what the FNB property barometer looks like. Download this now.
Therefore, at this stage, the residential property sector would be sensitive to any unwanted surprises in the form of an interest rate hike at this week’s Monetary Policy Committee (MPC) meeting of the Reserve Bank. Fortunately, at this stage such an event seems unlikely, with the expectation that CPI inflation is nearing its peak, after which it is expected to decline back into the target range of 3%-6% without requiring help from interest rates at this stage
This is what the FNB property barometer looks like. Download this now.
Recently, there has been some media discussion about whether the current time is the time to buy property, on the back of some assertions that residential property market “equilibrium” has been reached. It is surely safe to say that the residential property market has become more of a “buyers” market since early-2008, with prices having declined by around -17% in real terms since February of that year (“real prices” refer to average house prices adjusted for consumer price inflation).
But it is challenging to ascertain when a market has reached equilibrium, the price level where demand matches supply, especially as equilibrium levels fluctuate over time. Reaching equilibrium would imply that demand has finally caught up with supply after about 4 years in which the market could be deemed to have been oversupplied, a state which caused the downward real price correction in the market. Reaching equilibrium would also imply no further real price decline to come, unless of course further economic deterioration in the near term caused the market equilibrium price level to decline further, because price levels required to reach market equilibrium, or (otherwise put) market balance, do change over time as economic conditions change.
We believe that indications emanating from the latest results of the FNB Estate Agent Survey suggest that the residential market still has some way to go before it reaches that “holy grail” where oversupplies disappear and the market can finally be said to be realistically priced and, yes, in equilibrium.
The first and foremost factor influencing our view is the fact that, according to the agents surveyed, the estimated average time that a home remains on the market before being sold rose for the 2nd successive quarter in the 4th quarter of 2011, from a previous 17 weeks and 2 days to 17 weeks and 6 days.
This would suggest that the imbalance between demand and supply has deteriorated further recently. The recent average time on the market remains far above the 2 month level, and even well-above 3 months, levels which we would deem necessary to reflect a market with a “healthy balance between supply and demand”. There has been a broad trend of increase (deterioration) in the average time on the market since early-2010, after something of an improvement in 2009 on the back of major interest rate cuts.
The second indicator of pricing realism, namely the estimated percentage of sellers being required to drop their asking price to make the sale, has also shown the resumption of a broadly rising trend from late-2010 through 2011, and currently hovers around 90% of total sellers. Whilst one would always expect a significant percentage of sellers to “open the bidding” on the high side, the current percentage would appear to be extremely high when looking back to the lower percentage of sellers dropping their asking prices in years prior to the 2008 recession. In addition, 2011 showed further increase in this percentage, which is not what one would expect to see in a market getting nearer to equilibrium and price realism. While an additional survey question, regarding the average estimated percentage drop in price by sellers being required to do so, has only been asked for 2 years, we have seen a mild increase in the average estimated price drop from -11% early in 2010 to -13% by the end of 2011.
Therefore, the sample of estate agents surveyed during the 4th quarter of 2011 would not appear to believe that the residential property is yet realistically price given the level of demand, or otherwise put, they appear to imply that the market is not yet in equilibrium or “balance between demand and supply”. Admittedly, the appropriate average time on the market is debatable, but we believe that above 17 weeks is inappropriately long. This, we believe, requires either further real house price decline, or alternatively residential demand needs to strengthen considerably to catch up with supply.
And at this stage, the agents aren’t pointing to a positive move in residential demand. A key question posed to estate agents in the survey is with regard to their perception of residential demand strength, done on a scale of 1 to 10 with 10 being the strongest possible level. After a mild strengthening in the demand rating in the 3rd quarter of 2011 to 5.87, the 4th quarter (normally a seasonally stronger quarter) saw a mild decline to 5.66. In year-on-year terms this represents -2.2% decline on the 4th quarter of 2010. Agents have not perceived demand to have made any meaningful progress in terms of strengthening, following a significant surge from mid-2009 to mid-2010. This shouldn’t be surprising, given that since late-2009, there has been very little further interest rate reduction, and little support from a very mediocre economy.
In terms of expectations of demand in the near term, the 4th quarter agent survey returned a weak response, with a very significant drop in the percentage of agents expecting demand to increase, from 44% in the previous quarter to 17% in the 4th quarter. This was the lowest percentage of respondents expecting strengthening since the 2nd quarter of 2005.
When asking agents for the factors influencing their near term expectations, seasonal factors play the most important role in this deterioration by far, because at the time of the 4th quarter survey in November, they were looking at 2 months of quiet time ahead as the holiday season approached. However, there are certain other negative factors that have are significant, including the perceived “strict credit environment, “economic stress/general pessimism”, and still-unrealistic pricing by many sellers.
Also significant, is that only a few agents (7%) still see interest rate levels as still being a positive. The last rate cuts took place in 2010, and the stimulus from rate cuts has worn off.
In order to eliminate the strong influence of seasonal factors, we aggregate the results for near term expectations on a 4-quarter moving average basis, and the result is what we call the FNB Home Buying Confidence Indicator. The Indicator is on a scale of -1 to +1, with a -1 number assigned to a “weakening expectation” by an agent, a rating of zero to an “unchanged” expectation, and a +1 rating to a “strengthening” expectation. Here we see the 4th quarter Home Buying Confidence Indicator declining mildly on the previous quarter’s level, from 0.25 to 0.19.
The agents surveyed, therefore, appear to have become more pessimistic in their near term expectations, seasonal factors aside.
The Estate Agent Survey thus appears to support our opinion that further real house price (house prices adjusted for consumer price inflation) decline is required in the near term in order to shift the residential property market towards a balance between demand and supply or, otherwise put, equilibrium.