Lowest mortgage advances growth in six years

Private Property South Africa
Jacques du Toit

Data released by the South African Reserve Bank showed that the year-on-year (y/y) growth in the value of mortgage advances by monetary institutions (the total net outstanding balance on mortgage loans at these institutions) slowed down further to 11,3% in March 2009, after remaining unchanged at 11,9% in February 2009 from January. This was the lowest year-on-year growth in outstanding mortgage balances since March 2003, when it was also 11,3%, and was sharply down on the growth rate of 23,2% y/y in March last year. On a month-on-month basis the growth in net mortgage balances outstanding was marginally lower at 0,7% in March from 0,8% in February.

On the household front, growth in the value of mortgage advances, largely related to residential property, declined further to 7,9% y/y in March from 8,4% y/y in February and 9,9% y/y in January this year. The amount of outstanding mortgage balances in the household sector came to R708,1 billion in March, having a share of 72,2% in total mortgage debt (unchanged from February), which includes both residential and commercial mortgages. Household mortgage advances had a share of 69,9% in total credit extended to the household sector in March (69,6% in February).

The significant slowdown in the residential property market over the past two years and a sharp drop in mortgage loans granted by the banking sector for residential property, mainly as a result of much stricter lending criteria applied to credit extension, have largely contributed to the growth in mortgage advances tapering off to its lowest level in six years. House price growth is in negative territory in nominal terms, while in real terms prices have been declining since September 2007.

Mortgage advances growth is expected to taper off further in the near term on the back of housing market conditions and prevailing strict lending criteria.

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