New mortgage lending in decline in South Africa – but it’s not all bad news for home buyers

New data shows a further year-on-year decline in the value of new mortgage loans granted in South Africa, continuing to largely reflect the ‘contractionary’ economic environment.

The June 2019 South African Reserve Bank quarterly bulletin showed the value of new mortgage loans granted – residential, commercial and farms – to have declined at a year-on-year rate of 7.82% in the first quarter of 2019, after a 2.07% decline in the final quarter of 2018.

The commercial mortgage market accounted for much of the overall decline, said John Loos, property sector strategist at FNB.

Loos said that this is the third consecutive quarter of year-on-year decline, and is reflective of a very weak economic environment.

For home buyers, the picture is less gloomy as FNB said that the large new residential mortgage sub-component strengthened slightly in the first quarter of 2019 to record moderate year-on-year growth of 6.09% in the value of new loans granted.

This is significantly stronger than the commercial mortgage component, which saw a 29.6% year-on-year decline in the first quarter.

FNB said that of the two big applications for mortgage lending, namely loans granted on existing buildings and land granted for construction, it was the latter that showed the biggest rate of year-on-year decline of 27.5% in the first quarter, while the other category declined by 6.26%.

“With new building planning at mediocre levels of late, and economy-wide business confidence weak, we are not yet convinced that this summer quarters’ surge in vacant land mortgage lending represents any sustainable demand strengthening in the vacant land market,” Loos said.

“New mortgage lending growth remains in the doldrums, with the value of loans granted having experienced its third consecutive quarter of year-on-year decline as at the 1st quarter of 2019. Despite slight first-quarter growth, the new loan payouts growth situation also remains weak,” he said.

 


Read: Good news for South Africa’s property market: banks are lending

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New mortgage lending in decline in South Africa – but it’s not all bad news for home buyers