Issue 12 / June 2008
PROCEED WITH CAUTION
I am writing this newsletter on 1st June, the first anniversary
of the implementation of the National Credit Act (NCA). This
piece of legislation effectively changed the lending landscape
in South Africa forever.
It has had a profound effect on the property industry. In
retrospect, it seems bizarre that banks ever concerned themselves
only with how much income a bond applicant earned and didn't
give a damn about the client's expenses. Not only that, but
once you'd secured a facility from Bank A you could use the
same payslip to raise a bond at Bank B because the lenders
didn't share information. The National Credit Act put a long
overdue stop to all that.
The NCA was the first, but has not been the only factor to
rein in the overheated property market over the past year.
Steadily rising interest rates continue to put property out
of reach for many, especially first-time buyers. We have seen
rates rise by 4,5% in the past year and the Reseve Bank Govenor
has hinted at a further increase of up to 200 basis points
(2%) when the Monetary Policy Committee meets again on 12th
June. Many of my clients will be sensing an uncomfortable
déja vu as they remember how quickly rates shot up
to 22% in 1997. Let's hope that the Governor's stance will
be moderated by yesterday's announcement that, for the first
time in the current cycle, credit growth slowed sharply over
the 12 months to April.
difficult times for property owners have led to a practice
called Predatory Lending (or "Equity Stripping")
which can broadly be described as a scheme offered by
a "company" that comprises an abusive set of
lending practices targeting home owners in financial distress.
The company offering the scheme will essentially provide
assurances that, through the sale of the home owner's
property into the hands of the company, the home owner's
financial difficulties will be resolved, they will be
able to remain in their property as a tenant and, in time,
will have the option to re-acquire the property from the
company. The scheme is complex and space constraints prevent
me from explaining it in detail here, but the likelihood
of the home owner being in a position to re-acquire the
property is remote.
Companies engaging in these predatory lending schemes
will predominantly target home owners who have a fair
degree of equity in their property, but due to their financial
position, are unable to source additional financing from
the formal lending institutions.
In my last newsletter, I mused at how the finest creative
minds in the land could have come up with the name "Ooba"
in their rebranding of MortgageSA. "Ooba" is the
registered trademark of an overseas baby furniture manufacturing
company which holds the dot com domain, not to mention a virtually
identical logo as the rebranded mortgage giant.
Since then, the entire industry has been convulsed with mirth
over this R32 million excercise. Conspiracy theories abound
as to how the name came about. I've said enough about the
matter (this is, after all, my newsletter) but I invite those
of you who are interested in how corporate identities are
born to click
here check out this article.
Personally, I don't believe for a moment that MortgageSA would
perpetrate an identity theft along the lines advanced by some
bloggers. Still, I suspect this ooba booba will in due course
find its way into advertising textbooks and become compulsory
reading for students.
At least it has given us something to smile about! For a stagnant
property market shell-shocked by high interest rates and a
nation with a lot to be gloomy about, life is not rich in
comedy. We must cherish what there is of it and savour it
during these tough times.
secret to creativity is knowing how to hide your sources"
Albert Einstein (1879-1955)
THE BOND MAN SCOOPS AWARD!
I was delighted to accept the award for Best New Mortgage Originator,
at a glittering gala event held at the Arabella Western Cape
Hotel & Spa, near Hermanus. The evening, and a wonderful
weekend, were hosted by Independent Initiatives and Standard
Pictured with Gary Peterson THE BOND MAN
are, left to right, Rudi Botha - CEO PA Group; Peter Hewett
- CEO Independent Initiatives and John Rivers-Moore - Director:
Strategy & Planning, Standard Bank Home Loans.
The Bond Man
BOND MAN'S PROPERTY PICK OF THE MONTH
Asking price: R995,000
Garden apartment, Fresnaye
This is my favourite under-R1million property on the Atlantic
Seaboard at the moment.
It's a delightful one-bedroomed garden flat, measuring
50 square meters. I love it for several reasons, but mainly
because it opens onto 2 distinct outdoor spaces - a private
garden and braai area at the back and a sunny patio in
front that looks onto a wonderful tropical garden surrounding
a sparkling pool.
The apartment is in Fresnaye Close and comes with a secure
parking bay. This is a very well run, beautifully landscaped
security complex, one of only a handful of such complexes
in this prime neighbourhood. The asking price is R995,000.
Hillary on 082 781 1714 to arrange an appointment to view.
Interest rates remain topical, so let me know if you think
the Reserve Bank Govenor is on the right track.
There are 20 beautiful pens from THE BOND MAN up for
grabs for those of you who send in your ideas.
Telephone: +27 (0)21 433 1060
Fax: +27 (0)21 433 1062
Mobile: +27 (0) 82 453 7374
204 Main Road, Sea Point