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July 2016
F
NB Household and Property
Sector Strategist, John Loos,
says that the Reserve Bank
data showed a significant drop year-
on-year.
A holiday weekend in March may
have made some difference to the
level of loans processed, but some
decline has nevertheless been antici-
pated for some time.
The June 2016 SARB (Reserve
Bank) Quarterly Bulletin showed the
value of newmortgage loans granted
(Residential, Commercial and Farms)
to have declined by -14,57%. This is
significantly slower compared with
positive growth of +15,2% year-on-
year, in the previous quarter. This
shows a significant turnaround since
the 50,2% year-on-year, high reached
in the first quarter of 2014.
The value of residential mortgages
granted declined by -13,8% year-on-
year, while that of commercial mort-
gages declined by -14,9% in the same
period. Both these sectors’ negative
growth rates reflect a significant
slowing on the prior quarter’s posi-
tive growth.
The Residential Market is arguably
the ‘leading sector’, with home loan
applicants responding more swiftly
to economic or interest rate changes.
This market has responded to rising
interest rates since early-2014, as well
as the previous four years of deterio-
rating economic growth.
Loos says, “The FNB Estate Agent
Survey’s Residential Activity Rating
had been pointing towards a slow-
down in residential mortgage growth
for some time. We utilise this Activity
Rating as a ‘leading indicator’, with its
year-on-year growth peaks, leading
new mortgage lending growth peaks
by as much as three or four quarters.
After the Residential Activity Rat-
ing’s year-on-year growth last peaked
in the third quarter of 2014, it steadily
slowed into negative growth territory
by the second quarter of last year,
and has remained in negative terri-
tory since.
Examiningmortgage loans granted
on existing buildings versus vacant
land and construction, all three cat-
egories dipped into negative territory
during the first quarter of 2016.
The largest decline was in vacant
land as values dropped by -23%
year-on-year, in the first quarter. The
vacant land segment is normally the
most cyclical, so this should not be
surprising as interest rates rise and
the economy shows weakness.
By comparison, the value of Mort-
gage Loans Granted for construction
and existing buildings declined by
11%, and 14,85% year-on-year re-
spectively.
The broad slowdownmore-or-less
coincided with the onset of interest
rate hiking in early 2014.
Loos adds, “First quarter Real
Gross Domestic Product (GDP) con-
traction and rise in interest rates sug-
gests that further decline in the value
of new mortgage lending is likely in
the near term.”
On the non-residential side, too,
almost-recessionary conditions are
unlikely to boost demand growth for
commercial mortgage loans.
■
Housing
Decline in mortgage lending
The South African Reserve Bank has reported that slow growth in the
residential sector has changed to a decline in mortgage lending, in
residential andnon-residential sectors, during the first quarter of 2016.