Activity in the property market over the past year has been encouraging with most agencies reporting increased buyer activity and sales.
Given that for most homeowners, their bond payment it is the single largest cash outlay each month, skipping a few months can lead to a dire financial situation.
However, Seeff’s chief executive officer, Stuart Manning, says the renewed economic uncertainty and downward pressure is concerning for many homeowners. Especially for those that are already struggling to make ends meet, meeting their monthly bond repayments could be worrisome.
Already, he says more than a quarter of bond holders are in arrears and in view of the economic climate, the numbers are growing. The worsening economic outlook, shrinking employment, continuing petrol price hikes, municipal rates and electricity increases and rising cost of food and basic necessities, often above the average inflation rate, means that financial difficulty is inevitably mounting for homeowners, he says.
While the banks have made progress over the last three years to clear the volume of distressed properties out of the market, Manning says that the problem persists and is likely to grow in the coming months. Already, the second quarter FNB Property Barometer pointed to an increase in selling due to financial pressure to 18 percent, up from 15 percent in the first quarter. While still better than the 34 percent of 2009 (when the repo rate was at 10.5 percent and dropped to 7 percent by August 2009), the growing rate of credit impaired consumers is likely to spill into the housing market. According to the National Credit Regulator (NCR) the number of impaired credit records is rising and now accounts for almost half of all credit active citizens.
Often, such homeowners will first try and put their homes up for sale at an unrealistic price in the hope that they can settle their arrears and even make a profit.
It's vital for the health of the housing market that attention is called to this. It is also not just a problem of the lower or middle class as it cuts right through the income brackets, he says. Given that for most homeowners, their bond payment it is the single largest cash outlay each month, skipping a few months can lead to a dire financial situation.
Dealing with financial difficulty is something that consumers tend to try and handle themselves as it is a source of embarrassment and stress. Manning says this, however, need not be the case. Rather than wait for the situation to worsen, it is prudent to alert bond holders to the fact that there is help at hand and, the sooner they act, the better they can come out of a financially distressed position.
Often, such homeowners will first try and put their homes up for sale at an unrealistic price in the hope that they can settle their arrears and even make a profit. Given that prevailing market conditions are such that homes spend on average upwards of three months on the market and that buyers are not prepared to pay more than fair market value, this seldom results in success. All that happens is the homeowner will sink deeper into debt, Manning says.
Such bond holders should make contact with their banks as soon as possible. The banks are aware of the difficulty that faces consumers and have rescue programs to deal with their situation, he says. The objective is to keep homeowners in their homes as far as possible and the sooner they act, the sooner they can get assistance such as a restructure of their home loan to bring down the monthly payment for example. The longer you leave it and the bigger the arrears, the more difficult it becomes.
In instances, such as loss of employment or income for example, where even a restructure of the home loan debt is not going to provide relief, moving to rental accommodation is better rather than worsening the situation. Here the bank programs aim to assist by getting the property sold as quickly as possible and providing benefits such as a reduction of the debt, a responsible repayment structure to settle the remaining debt and the possibility of emerging with a clear credit record.
This however, takes time, says Manning. A more viable alternative is to liaise with real estate agencies that have programs in place to assist such homeowners. The Seeff Express Sales Programme, for example, has been developed in partnership with the banks and aims to significantly speed up the process by getting the property sold as quickly as possible for the best market price while still providing the benefits of the banks’ rescue programmes. Each week or month that a home remains unsold, interest mounts and the sooner this is dealt with the better.
Bond holders can contact Seeff via email for more information.
Print
