THE value of total South African mortgage advances outstanding saw its year-on-year growth rate continue its long multiyear declining trend, edging steadily closer to negative growth territory. Growth in monetary institutions’ outstanding mortgage balances slowed down further to 3,6% year on year in October from 4,8% in September, which was the lowest growth on record.

Month on month, the outstanding balance on mortgage loans was up 0,3% in October, after rising 0,2% in September. Outstanding mortgage balances in respect of the household sector were up 3% in October, down from 3,9% in September.

Month-on-month growth of 0,2% was recorded in October from 0,1% in September.

At R713,2bn in October, the share of outstanding household mortgage balances in total credit extension to the household sector remained stable at 70%.

Total credit extended to the household sector, which includes mortgage advances, tapered off to 2,3% in October, from 3,1% in September. Month on month, the credit growth rate remained stable at 0,1% in October from September.

Absa senior property analyst Jacques du Toit says the housing market conditions have improved somewhat in the past two months with nominal year-on-year price growth turning positive again after being in negative territory since late last year.

“This is according to Absa’s latest house price index calculations. Property transaction volumes also appeared to have bottomed and are gradually rising to higher levels. These trends, driven by lower interest rates and less tight lending conditions, are expected to cause the year-on year growth in mortgage advances to reach a lower turning point in the near term,” he says.

First National Bank property analyst John Loos says while residential mortgage advances are the lion’s share of the total, and thus are the major influence, he has seen commercial mortgage advances growth literally dropping like a stone.

Residential advances for September (the split runs one month behind the total) showed 4,8% year-on-year growth, down from 5,4%, as this category of loans starts to reflect the dramatic drop in new lending from around mid-2007.

Commercial property advances recorded 8,5% growth for the same month. The smaller farming sector mortgage segment showed 14,4% year-on-year growth for September.

Source: Business Day