You know, I have been looking at the volumes of credit extension and am suitably impressed. Oh, you might say, that’s “glass half full” stuff. But you know the old story, if you “gave” me something a year ago or just after Nenegate, would I have taken it? A resounding, Yes!
So let’s dig a little deeper using ABSA’s Credit and Mortgage Advances Report as at end-August 2016 and the microcosm of ooba’s Origination Overview as at end-July 2016. Not entirely comparable, but good enough for us to make some points on growth in our industry.
Is the market declining? Yes it is. But if you took that feeling in your gut in December 2015 and as you watched the Rand/UKP exchange rate sail off into the sunset and turn just before R25, you will know what I’m referring to when I say, “I would take what we have now”.
According to ooba, their volume of applications is down 5.67% comparing the cumulative year-on-year [ie, Jan-July 2015 totals to the 2016 period] figures. In fairness, the rate of decrease has increased so that June 2016 compared with June 2015’s applications volume decrease is 17.87%. In round figures, the month of June 2016 is 18% less than the same time last year.
Now let’s look at ABSA’s analysis. You cannot compare the percentages as they are talking to Total Advances of lending but a few points relate to trends:
- Growth in outstanding Secured credit balances for households showed a 3.1% growth up to end-July 2016. This number includes Instalment sales [read: car finance] which has negative growth. To that point, we know car sales and finance are declining rapidly.
- Mortgage balance growth is rising 5.7% in July off 6% in June2016. This growth is after taking into account any capital injections into bonds and any increased payments. But it would also include any non-payment of mortgages but frankly, I don’t think the banks are bleeding in this area at this stage compared with normal default ratios.
- The great eye-opener is Unsecured lending. Growth per annum between 2010 and 2013 peaked as high as 30% but since then, it has plummeted through 0% to about -8% to date. The unsecured lenders are also experiencing dramatic bad debt levels as the consumers try to repay their personal loans.
Given the figures of ooba and the advances growth of Mortgage balances, if you had said to me that’s it for July in January 2016, I’m still telling you, I would have taken it. Not sure if you agree?
So where are we at? South Africa is not accustomed to long periods of 0% growth in the economy. There is really no excuse. Of course it’s better than negative growth and hugely better than the gut-wrenching collapse of 2008-2010, the infamous Sub-Prime Crisis [for which, to the best of my knowledge, no one has been prosecuted – given that the rip-off took place inside the law!]. But no-growth is akin to oxygen deprivation – you don’t feel it initially but it slowly takes hold and weakens you. We have just had a 3.2% growth reported and what an injection of fresh clean air! Don’t hold your breath though, we’re told, as it was just a statistical aberration. And some good news is coming out of China recently. Just for it’s size and perception of good news, that is good news. Another good news element is the fact that the National Credit Regulator’s enhanced credit criteria are curbing reckless lending to the point that only responsible lending to sustainably employed people can occur. Very good news for the consumers but then you just need to watch for rogue lenders cropping up again.
It is true that only Politics now bedevils the economy. Affecting Confidence we know is a hammer blow to growth. It saddens me that the sale of Tekkietown to Steinhoff, as one example, now has its expansion plans in Poland. This is great for the shareholders, but what a tragedy for South Africa and Southern Africa. What a powerhouse we fly over to do business in a business-friendly, fast-growing economy!
All that said, growth is growth and we’ll take it at any level. And it seems USA will not be raising its interest rates too soon. We’ll take that as well.
A closing point really close to home. Homeloan Junction’s performance has been beating the trends. If you look at August-on-August, applications have dropped by 3. You read right, just 3 applications. And then, if you look at July 2016 to August 2016, applications, coming out of Winter, increased by 75. That is really good and a testimony to the whole team who are putting heart and soul into their work effort. Very well done!!
We include this information only to say: It can be done! If you internalise, or the popular word, “mentalise”, everything you hear or read, you may be convinced you don’t have a chance. The day you are, you don’t. Henry Ford again to remind us: “If you think you can or you think you can’t, you’re right.” Always remain positive and determined to succeed. Things could have been catastrophic and they have not been. Let’s trust the market can take any other shocks that may be thrown at us this year.
Yours in Property