Johannesburg - Black mortgage originators operating in South Africa's township property market are being hit by a double whammy.
Firstly, they are still struggling to crack the white-dominated mortgage origination market and, secondly, the National Credit Act (NCA) is severely hampering their business.
Mortgage originators are sensitive to the performance of the property market and any dip in house sales puts pressure on their revenue because they earn commissions from acting as middlemen between lenders and homebuyers.
The originators have become so powerful in the property market such that they generate about 70% of home loan sales for the banks. The bigger the volumes they generate, the greater the profits they make.
Nakedi Magodielo, the managing director of Agang Bond Originators, said the NCA had worsened their plight.
He appealed to the government to intervene in the property industry to forcefully create opportunities for black originators, developers and estate agents.
The NCA was introduced by the government in June to stamp out bad lending practices.
Turnover halved
"My business is still a start-up and the next thing we are being hit by the NCA. My turnover has gone down by more than 50%. We are thinking of closing down our office in Middleburg, Mpumalanga, and as a result four employees will be affected," said Magodielo, whose company employs 27 people.
"My view is that the NCA is a good legislation and it should have been done a long time ago. We are now faced with the situation where people are overcommitted and are struggling to repay their debt. This has affected the lower end of the market, which is our core market. At some point in future the impact of the legislation will moderate. But now it is very tough," he said.
Eddie Mabusela, the managing director of Property Finance, who operates in Tshwane, is also decrying the negative effects of the legislation on his business.
"It is not easy to qualify our customers these days even if they are not blacklisted. As a result my turnover has dropped by 40%. We have to find an alternative plan. I'm now considering reducing my staff," said Mabusela, whose company employs 14 people.
But Tsogo Bond Originators director Fondi Maluleke, whose mortgage origination business operates in Limpopo, North West and Free State, is optimistic of a turnaround despite sales dropping 25%.
"Sales have declined since June but if you give the banks quality loan applications you stand a better chance of doing well. I have worked in the banking industry for 17 years and I know what banks want. I do pre-qualifications myself and I then motivate for the applications to be passed through," Maluleke said.
Not only NCA
Gavin Opperman, the managing executive of home loans at Absa, said the NCA had affected the low-income market - where there's huge demand for housing.
"The levels of approvals on home applications have declined by an estimated 10% to 20% in certain sectors. This has impacted on the lower income market," he said.
"However, this effect of the NCA should not be interpreted negatively because the legislation's intention is to protect consumers from becoming overburdened by debt and promote responsible borrowing and lending practices," Opperman said.
Louis Malherbe, the spokesperson for the home loans division at Nedbank, said the bank had experienced a slight decline in sales due to a number of factors, including the NCA.
"It is not just the NCA, the interest rates increases and the loss of confidence in the market because of the subprime problems in the United States are also having an impact. This is despite the fact that the subprime market is not applicable in South Africa," he said.
The subprime problems in the US were triggered by mortgage providers who offered loans to borrowers who were overcommitted. Most of the loans were taken for second or holiday homes. When the interest rates started to increase homeowners struggled to repay their debt, sparking worldwide financial markets turmoil.
Big firms have upper hand
Despite the NCA teething problems, black originators say the banks must help them to muscle their way into property developments that take place in the affordable housing market.
Maluleke said black originators should be dominating the township market but are struggling to compete with big firms such as Mortgage SA, Bondchoice, Betterbond and Wizard.
"White originators are getting a bigger percentage of the emerging market than we do. We need to be given an opportunity to penetrate this market," he said.
- City Press