Business, Cash & Bad Credit Home Loans South Africa

By Guest Writer Leilah Jumat

In the property investment industry, South Africa follows a unique system where every plot is reflected on a diagram and ownership of the plot is recorded in the relevant Deeds Registry, available for public viewing. South Africa is known to have one of the best deeds registration systems in the world with an exceptional degree of accuracy and security because of the influx in property investing in the country. Property can be owned individually, jointly or by a corporation or company registered within or outside of South Africa.

Why Is The Property Market Is Going Down?

With the amended National Credit Act (NCA) that came into force on the 1st June 2007, the property industry evolved into a wall of stability that is completely necessary in a country like South Africa. Despite the scores of speculation and the horror stories you might’ve heard about the NCA regarding home loans, the amendments would not have been approved if there were possibilities of failure for South Africa’s citizens. So to set everyone’s mind at ease, the NCA will not impact on the time period needed to grant or reject home loan approvals; though no one can guarantee the impact that the NCA will have on the property market, those stories are all just a classic taste of sensationalism.

Yes, the NCA has definitely altered the way banks and financial institutions operate when considering an approval for a home loan or bond, but the municipality is almost certain that these types of loans will hardly be affected by the amended NCA. The NCA is to put an end to “reckless money lending” thus protecting individuals from getting in way over their heads by borrowing money from the bank which they cannot afford to repay. This way, individuals will be guarded against hefty monthly bond repayments; the NCA will see that they are comfortable paying a mortgage loan that their paycheque can be accustomed to while also preventing them from debt-drowning.

The Nelson Mandela Bay Valuation

A recent case study depicts how the NCA has already impacted on property valuation. The first phase of the R65 million Nelson Mandela Bay municipality property valuation process that every property in the city will undergo during the next two years, has already started. Though a definite number has not been determined as yet, the valuation process will result in an increase of rates according to each specific region. Municipal manager Graham Richards has also stated that some properties will be evaluated higher than others, depending on where in South Africa they are located, which in turn will reflect on their rates.

“The purpose of this is to determine a fair valuation of all properties, not only in the Nelson Mandela Bay municipality, but also nationally, and it is therefore important that property owners allow data collectors, carrying the correct accreditation, to conduct a proper and accurate data collection of their property,” said Richards.

Loan Qualification Criteria

The most important factor that has changed is the loan qualification level. Before the amended NCA was introduced, financial institutions would grant a home loan to a potential buyer based only on a third of the buyer’s total income, that’s apart from their other debt like car finance, eloan secure, children’s student loans, clothing accounts etc. Now with the amended NCA in practice, the loan is granted based on the buyer’s disposable portion of income after all debts have been brought into consideration.

Though the rate of property investment in South Africa is clearly decreasing, the method that banks and financial institutions (see international world investment loans for more information) are operating with today seems far more promising than previous methods. Initially, with regards to the real estate industry, the amended credit act will be a hiccup in some of our plans we might’ve had for the future.

It would take some time to readjust to the new rules but once that is overcome South Africans will be able to see that the act is completely necessary and we need to strive for a healthy financial status instead of burdening ourselves with unnecessary debt.  For those who can afford investment property in South Africa, there is hope therefore.

Problems For Young Buyers

However it is true that young couples and newly-weds who wish to invest in property together would have to either save up for a few more years than they initially planned for or lower their expectations as it would be more difficult to get a bond approval, especially if it is their first bond. The municipality states that this will turn younger couples to rent instead of own which in turn will boost the property rental market which is a positive factor.

The new property valuation process will also result in landlords being stricter about how much they will grant as rental income. Initial deposits to secure a rental apartment or house will also increase and residents will have to prove that they can afford the monthly rental payment because of the increase in property valuation.

Debt Crisis?

With the amount of South African citizens that are drowning in debt we should all try to look at the amended National Credit Act with an open mind and not be pessimistic because the three-story mansion in Llandudno is now even less affordable than it was before. The NCA will be a lifelong lesson to South Africans to be smart with their finances. The good news is that despite the drop in property sales now, the property industry is very much positive and is not expecting a noticeable decrease in sales for the next few months. This is merely an interlude.

Reader Question

South African citizen asked:

Does anyone in South Africa know whether the cost of buying a house will be increasing or decreasing by next year? Need to know when the right time will be to purchase a house and Ill wait a bit longer if prices are going to decrease.Only answer if you actually know what you’re talking about!