Thinking of buying a house? Not so fast say SA banks

New data on new mortgage lending from the South African Reserve Bank shows a significant year-on-year decline – which is in line with numerous indicators of residential activity pointing to slowdown in the property sector.

The June 2016 SARB Quarterly Bulletin showed the value of new residential mortgage loans granted have declined by 14.57% year-on-year for the 1st quarter of 2016.

“This is significantly slower compared with positive growth of 15.2% year-on-year in the previous quarter, and now reflecting a very significant turnaround since the 50.2% year-on-year multi-year high reached in the 1st quarter of 2014,” said John Loos, household and property sector strategist at FNB.

Both the commercial and residential sub-components were “drags” on the growth rate in the 1st quarter. The value of residential mortgages granted declined by 13.8% year-on-year, while that of commercial mortgages declined by 14.9% in the same quarter.

Both these sectors’ negative growth rates reflect a significant slowing on the prior quarter’s positive growth.

StatsSA last week reported South Africa recorded a negative growth rate of -1.2% in the first quarter of 2016,while the country’s unemployment rate increased to 26.7% of the labour force, up 2.2% from the previous quarter.

Read: This one graph shows that South Africans are leaving the country

Loos pointed out that for the residential mortgage lending sector, the 1st quarter of 2016 was the 3rd consecutive quarter of growth slowdown in the value of mortgage loans granted.

The property market analyst said that the residential market is arguably the more “leading sector”, with home loans applicants responding more swiftly to any economic or interest rate changes.

“This market has long since begun to respond to rising interest rates since early-2014, as well as to four years of deteriorating economic growth, and slowing growth in new residential loans granted had for a while suggests that commercial grants would soon follow that trend at a later stage.”

FNB mortgage index

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Thinking of buying a house? Not so fast say SA banks