Johannesburg – As far as repayments on home loans are
concerned, South Africans are in a much more favourable position than their
By far most of the 2.6m South Africans with active home
loans have personal equity in their properties. This means that the current
value of their properties is higher than the outstanding loan.
This is the finding of recent research by Lightstone, which
compared current property values with outstanding loan amounts.
This good news for homeowners and lending institutions is in
sharp contrast to the picture in foreign property markets. More than a million
Americans who took home loans over the past two years now owe more than their
home is worth, Reuters recently reported. This amounts to one in every ten home
loans taken – an indication that the US housing market is still in deep
trouble. Many who bought homes since 2010 and thought they were buying at the
bottom of a market which had already fallen heavily were caught unawares by
further price declines over large parts of America.
In South Africa property values are generally higher than
the outstanding loans.
Lightstone property analyst Hayley Ivins says that to
calculate the ratio of the outstanding loan to the value of the property
certain assumptions are made based on Deeds Office data since March 2009. It is
assumed that a loan of 87.75% of the then market value was granted with a loan
term of 20 years and at an interest rate of prime minus half a percentage
She says the results at national level are that homeowners’
capital equity averages 38.9% of the value of the property. This means the
current value of the property is 38.9% higher than the outstanding loan amount.
In Gauteng values are 37.2% above the loan amount and in the Western Cape 36.7%
“From this it appears that loan institutions’ decision to
make their lending criteria stricter and demand bigger deposits has benefited
homeowners.” Ivins says that bigger deposits make negative homeowner equity
less likely by creating a buffer against financial risks.
The fact that interest rates have remained the same since
November 2010 means that a larger portion of the monthly home loan instalment
pays off the capital debt and not merely the interest.
Jacques du Toit, property analyst at Absa’s home loan
division says this is an indication that many households have not taken on
additional debt but have continued to pay off their home loans.
“It shows that the (South African) housing market is
relatively healthy compared with foreign housing markets.
For more business news in Afrikaans, go to Sake24.com.