Lower interest rates haven't worked yet

Year-on-year mortgage advances growth slowed down to 8,2% y/y in June from 9,4% y/y in May this year.

The year-on-year (y/y) growth in the value of total mortgage advances by monetary institutions (the net outstanding balance on mortgage loans at these institutions)

tapered off further to 8,2% in June 2009, from 9,4% in May, according to data released by the South African Reserve Bank. This was the lowest year-on-year

growth in outstanding mortgage balances since July 2000, when it was 8,4%. On a month-on-month basis the growth in the outstanding balance on mortgage loans was a negligible 0,1% in June.

In the household sector, growth in the value of mortgage advances to households, largely related to residential property, declined to 6% y/y in June from 6,8% y/y in

May and 24,8% y/y in June last year. At a level of R708,4billion in June, the amount of outstanding mortgage balances in the household sector had a share of 72% in

total mortgage debt in June, while having a share of 70% in total credit extended to the household sector in June.

The residential property market slowed down further during the first half of 2009, with house prices declining by a nominal 3% and a real 10% during this period, according to Absa's calculations. This was mainly on the back of adverse economic conditions, impacting employment, household income, and housing demand and supply conditions. Nominal house price deflation is forecast to continue in the rest of 2009, slowing down towards the end of the year.

Consumer price inflation, at 6,9% in June, is expected to drop further, but to remain outside the inflation target range of 3%-6% in the near term. Demands for wage

increases and wage settlement rates of well above the CPI inflation rate are contributing to inflationary pressures. As a result, interest rates are forecast to remain

unchanged at the next Monetary Policy Committee meeting in August.

Against the background of these developments and expectations, mortgage advances growth is expected to slow down further into the second half of 2009.

• Jacques du Toit is senior property analyst for Absa Home Loans.

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responses to this article

Isn't it to be expected? I'm no analyst but surely it's simple to analyse the factors that led to this? It seems that the housing market was hit by the perfect storm, world economic turmoil, rising interest rates plus new regulations. The promulgation of the NCA had a devastating . .more impact on the middle of the property market and the economic downturn (only in it's second year) has exacerbated this. . .less by Kenneth or Siviwe on July 30 2009, 16:19 Find this comment inappropriate? Report it

Quick thought If the other articles are to be believed than I would say that one of the reasons for interest rate drops not working is because the effective drop for consumers is not as large as it seems. Apparently before you could have prime less 2 now its prime and . .more thats it.... so even if it dropped by 4,5% , effectively its only a 2,5% drop. Comments ? . .less by Gem on July 30 2009, 17:53 Find this comment inappropriate? Report it

The UK has almost zero interest rates and property is still falling in price. It's simple - houses are overpriced and people don't want to over pay on an asset that is falling in price ... that's assuming, of course, that they can even to afford to buy it ... in most cases they . .more can't. Get property back to where it should be priced and the housing market will work normally again. . .less by CJ Says on July 30 2009, 23:37 Find this comment inappropriate? Report it

mortgage rate . It wont work , people have no jobs , rates are too expensive , beee, bee, bbbeee , is SA sub prime . Too few whites paying the most taxes , the blacks pay tax but its bee, beee, bbbeee . no new blood for the economy, all it has done is take from . .more the whites , now the whites have left its all fall down the black african grass root level of doing things , look north and say i am wrong . What has a black african ever done , phuk all without the whites . . .less by Dilligaf on July 31 2009, 02:50 Find this comment inappropriate? Report it

CJ, PLEASE EXPLAIN. CJ, every Saturday I check prices in the property inserts and although the insert is down about 30% in pages the home prices are still HIGH, HIGH. Why is this? Is there a reason for these same over priced properties appearing week after week? by ER on July 31 2009, 06:43 Find this comment inappropriate? Report it

Ramblings Firstly to Diilgaf, you are an idiot, finish & klaar. To CJ, I'm not convinced it is as simple as that, I don't think people necessarily think house prices are overpriced (although they they probably are). Most people's attitude is that if they can get a . .more bond to buy a house that they like, they will buy rather than rent. Take away the fact that it doesn't make economic sense, people prefer to own something than rent something. I think Quick Thought has a good point. So CJ, I reckon when (or is it "if") things start to look better re: world economy etc. and our banks feel more comfortable lending out money again, houses will start to sell again because people can't resist buying things. I agree that house prices will drop, but not significantly in my opinion. . .less by M on July 31 2009, 09:53 Find this comment inappropriate? Report it

you cant ask CJ says, He doesnt own property, he has limited experience in the market. by dfb on July 31 2009, 10:08 Find this comment inappropriate? Report it

LIMITED... More like B@GGER ALL EXPRIENCE Poor CJ, he is the village idiot who everyone picks on. by Stalin on July 31 2009, 10:54 Find this comment inappropriate? Report it

@ ER Denial - it is part of the crash process - they think the good times are just around the corner - they think they will nab a sucker prepared to pay that price as long as they hang around long enough - they believed the experts when the said "property . .more never goes down". The buyers are there but they want affordable properties. The sellers are piling up but they are reluctant to go lower. Something has to give. The buyers are not going to suddenly get flush with cash in these recession times - so the houses have to fall. Those sellers who get out first and drop their prices will nab the few buyers out there - the others will chase the market down, getting more and more desperate. That's how crashes play out. . .less by CJ Says on July 31 2009, 19:55 Find this comment inappropriate? Report it

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