The value of new mortgages granted in the residential sector was down -10.9% year-on-year in Q4 2016. This is according to the Reserve Bank’s latest Quarterly Bulletin, which pegs mortgages across all property types (residential, commercial and farms) -7.07% down year-on-year in the final quarter of last year.
“The residential market is arguably the more ‘leading sector’, with home loans’ applicants responding more swiftly to any economic or interest rate changes,” said John Loos, FNB’s household and property sector strategist, commenting on the numbers. “This market has long since responded to rising interest rates since early-2014, as well as to five years of broad deterioration in economic growth, and slowing growth in new residential loans granted have for a while suggested that commercial grants would soon follow that trend at a later stage.”
Did you know: The value of new mortgages granted was down 50.2% year-on-year in Q1 2014
The largest decline was in the value of mortgage loans granted for construction, where value dropped by -19.62% year-on-year Q4 2016. Mortgage loans granted on existing buildings declined year-on-year by -5.29%, while those on vacant land declined by -1.25%.
“The big decline in loans granted for construction points to a weak 2017 on the building activity front, and we expect that this would be especially so in the case of non-residential building activity,” said Loos, noting that new loans paid out declined by -7.71% year-on-year in Q4 2016. “The value of capital repayments for Q4 2016 also declined by -9.2% year-on-year.
“This slowdown in capital repayments growth is largely explained by a slower rate of properties being bought and sold, which slows the rate of loan settlement on transacting.”