Credit Act 'saved house market'

Johannesburg - The advent of the National Credit Act has protected hundreds of thousands of South African households, and rescued the property market over the long term.

Realty 1 International chief executive Mike Bester says that before the act came into force last year South Africans lived lavishly on credit, with the average homeowner having a bond or two, having bought one or two cars on debt, and with a number of credit cards and personal loans.

Then, overnight, the Credit Act turned off the tap for consumer borrowing - and the housing market felt the greatest impact. He reckons in hindsight that was a good thing, rescuing the housing industry over the long term.

Property appraiser and economist Erwin Rode of Rode & Associates says the act is certainly a good piece of legislation, but it should not be overrated. He considers it only one of a combination of factors pricking the bubble of elevated real house prices. Other factors have been the political uncertainty, Eskom and rising interest rates.

Absa senior property analyst Jacques du Toit believes that, had the act not been introduced, problems would have been far worse.

The law, he reckons, will prove positive in the long run, specifically while South Africa is a credit-based economy with most household spending on credit.

He points out that the country is going through a period of adjustment to the act, which will ultimately benefit the consumer as well as the property and the financial sectors.

- Sake24