The darkest hour of night comes just before the dawn
Category Blog
While this well-known maxim may well date back about three-and a half centuries, it nevertheless remains relevant to this day. And not least so in the residential property market, which is showing welcome early signs of a long-overdue uptrend - albeit seemingly mild at this stage.
The 'darkest hour' though is reflected by the unusually high number of sellers that are selling at lower prices than they paid for their properties, if they bought during the last 5 years. Often resulting in a deficit. The price they've realised is less than the outstanding bond on the property. By selling many are now needing to negotiate with the banks on settling the deficit.
The 'dawn' is on the horizon. Albeit difficult to believe. This is reflected in some interesting feedback from service providers. Private Property reported record breaking activity on their property portal. This should translate into an increase in transactions, and hopefully some movement in what has been a stagnant market. The big bank have surprised me - particularly through their increased appetite to lend. They will now grant 100% bonds up to a value of R5million rand, when recently the ceiling for 100% bonds was R3million
Another example, Standard Bank and Absa will now lend, in an increasing number of cases, 105% up to R1.7m. This will cover transfer costs at the lower end of the market. Why would the banks do this? Surely, only if they see that the value of the properties they are bonding are soon to increase in value. It would be foolhardy to lend to the maximum in a market that continues descending.
Generous lending
It is not since the early millennial period, culminating in the 2008 financial crisis that South African banks have been this generous in their lending criteria. This must surely indicate the glimmer of 'light before the dawn' - and that banks must be expecting the value of their assets to start appreciating.
For homeowners who are near, or already in, distress, my best advice is to go and speak to the bank. Discuss the situation. Start negotiations. You are likely to get a far more compliant response than you expect.
Amongst a few other indications there does seem to be enough reason to expect the market to stabilise and begin improving even if hardly noticeable to begin with. Important to remember that once it is obvious the market has started to turn...it has in fact turned 4 to 6 months earlier!
Author: Ronald Ennik
