Property Group Urges Banks to Drop Deposit Demands - 02-12-09

February 12 - While it may have been achievable several  years ago to raise 25% of the value of a property that didn't surpass R50,000 in total price, today that percentage would be impossible for a stand whose price has risen to R500,000, for example.

Sable Homes, one of South Africa's leading property developers, is urging the country's banks to re-examine their demands for the deposit that a potential buyer needs to put down before a home loan is approved.

The Sales and Marketing Director of the property group, Keith Nash, said that most South Africans were not able to come up with 25% of the value of average homes and stands on the market right now. As such, there are very few first time buyers in the industry right now.

"What's more, the banks' caution in demanding such large deposits is unwarranted," said Nash. "We are not living in the US where the sub-prime lending crisis has caused property values to drop so drastically. In fact, the latest figures show that values in SA have declined far less than 10%, so a 10% deposit would be more than adequate to ensure that there was sufficient value in the property to secure a home loan."

Nash said the effect of the banks' refusal to budge on their deposit requirements is being felt all across the property industry, from the developers, to the sales agents and from the interior designers to the buyers themselves.

"In fact, if the banks do not lend or make it possible for potential buyers to access finance, their fear that values will fall is likely to become a self-fulfilling prophesy," warned Nash. "They will effectively put people out of work and those without jobs will not be in the market to buy homes or land. Demand that is still strong now will dry up and then prices really will come down."