Whilst the European crisis and it’s ripples to South Africa have got grey suited local bankers all in a Windsor knot, one motor finance company is putting its hand up making itself available for, what is believed in some circles, to be signs of better times ahead for residential property.
 
In a move that in itself may boost the whole house marketing sector, luxurycar manufacturer, BMW, has made public its plan to move into the home finance sector. Actually BMW have been easing its way into this world for some time.  But now there is a drive to acquire a greater number of applications.
In pursuit of motive for the movement into the housing market BMW’s response has been a bold one.  BMW intends to counter what it considers to be extremely poor service by banks. It seems that banks are quivering in the face of implementing Basel III.
 
Basel III is the third of the Basel Accords. It was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis.

With the onerous requirements of Basel III on banks, one ought not to be surprised to see that non-bank players are becoming more prominent in the SA home loan market.We should expect this to continue.Expect that the standard home loan interest rate will have to be set one or possibly even two percentage points above prime, because the cost to the banks of funding these loans will rise that much.

Back to BMW, an investigation by Finweek found that: BMW Finance provided "better service, a more competitive interest rate & lower administrative costs than any of SA's big 4 banks." "FNB was the only bank that came close to providing a deal that competed with that of BMW Finance. However, the bank's initiation fees were higher & you are required to open a primary bank account with it."

Bill Rawson of Rawson Properties said in a press release that the move by BMW Finance, in his view, makes complete sense because the existing BMW clientele base is almost certain to be an excellent initial target market.  The link-up between motor cars and homes also increases the security of the loans because homes are a more reliable asset than vehicles.

Watch this space as more motor finance houses follow suit.

More up-beat than the effects of BaselIII is the belief in a slow but steady upturn and recovery in the property sector. BMW’s lead with a plunge into the market is not all that has estate agents aflutter.

- the average House Price Index is now at a two year high and rising at 8,6% per annum.
- a 12% plus decrease in civil summons in the first quarter of this year.
- a 42,4% decrease in liquidations
- the number of 100% bonds issued has risen by over 35%.
(According to the FNB Property Barometer.)

So back to the banks who are in fact now easing up on the criteria that they apply to home mortgage loans (whilst still adhering to National Credit Act regulations), says Leonard Kondowe of Rawson Finance, the bond originators serving some 160 Rawson Properties residential property marketing franchise teams countrywide.

Kondowe points to several indicators point to the whole bond mortgage scene becoming far more consumer-friendly.  In particular, he mentioned that:

• One of the top banks in South Africa is now quite regularly granting 100% loans to salaried applicants for properties valued below R1,5 million, the offers valid for both clients of this bank and those who bank elsewhere. To be successful, said Kondowe, the loan applicant must be able to show that he has a favourable repayment profile, that he had not in the past 12 months  taken out an unsecured loan with a monthly repayment not exceeding 10% of his gross income and that any such loan is below R50 000.

• Most banks have increased their 100% loans to the affordable housing segment (i.e to those clients earning single or joint income of not more than R18 000 per month.)

•Rawson Finance has seen their grant levels increase by more than 100% from May 2011 to May 2012, a sure sign that the South African property market has taken a turn for the better.

The current low interest rates, said Kondowe, will probably be maintained for the foreseeable future and many analysts seem convinced that South Africa can ride out the effects of the European Financial Crisis. Although difficult times may be ahead they are unlikely to differ from the difficult times currently experienced.  The impression one gets is that though ill, the financing market is certainly not terminal and will continue to survive through innovation and customer service, thereby providing the necessary products in line with market demand.

Thanks to Rawson Properties and Matthew Campaigne Scott, eProp Contributor