Success in residential property marketing depends to a very large degree on the availability of credit and, although South Africans are still inclined to regret that the banks are now ‘too strict’ and ‘lack sympathy’ with the man-in-the-street, the individuals’ credit situation is satisfactory, albeit in need of adjustments here and there.
This is the view of Mike van Alphen, National Manager of Rawson Finance, the Rawson Property Group’s bond origination division. Extracting figures from a recent NCR Credit Bureau Monitor which reviewed statistics from June 2009 to June 2013, van Alphen said that there were just over 20 million credit active consumers in South Africa at the end of June this year and the number of credit accounts had increased to 71,20 million.
“What the pessimists will point out to you,” said van Alphen, “is that the NCR records show a slight quarterly increase (by 161,000) to 9,65 million in the number of consumers with impaired records. Although improvement is called for here, we are still left with 10,5 million individuals to whom organisations are able to grant credit and this is a significant total. It should also be noted that of those needing reinstatement as debtors, 14% were only one or two months behind in their debts, with 21% three months or more behind.”
These figures, he said, give an organization like Rawson Finance confidence for three main reasons: firstly, they reveal that the debt tracking systems are ‘pretty efficient’ and that it is unlikely that the majority of those deemed creditworthy by NCR have some serious misdemeanour in their past which should disqualify them as borrowers.
Secondly, said van Alphen, the figures reveal that there are sufficient in-good-standing debtors ‘out there’ to keep the housing market alive and active.
Thirdly, the NCR figures show that there is still, as in most African countries, a big reservoir of citizens who have never had formal credit of any kind but who, with help, could develop into becoming house buyers. This, said van Alphen, is especially true in the informal settlements where chaotic or non-existent home ownership documentation has mitigated against the orderly transfer of homes but will in time be replaced by conventional, legally correct systems, which, he believes, will usher in a boom in informal settlement sales. In certain areas, he said, a recent report has shown that this is already happening.
Also encouraging, said van Alphen, is the fact that many loan institutions and bond originators are now becoming more skilled at advising mortgage loan applicants with impaired credit records how to straighten these out.
“A one to four month default on a debt can often be put right,” said van Alphen, “and in our experience banks will respect the applicant for doing this. Only where there has been a court judgment or an administrative order is it difficult to get approval for the reinstatement of a debtor.”
The challenge in the months ahead, said van Alphen, will be to ‘sell’ the obvious advantages of home ownership better and to eradicate, at least to some extent, the instant gratification culture which is currently evident in South Africa and which results in too much cash being spent on frivolous items and activities which can have no lasting value.