December home loans declined year-on-year to 13,2percent from 14,9percent in November, in what analysts said was the result of new stricter legislation and lending criteria.
According to statistics released by the South African Reserve Bank on Friday, residential mortgage loans declined from 13,7percent in October to 12,5percent in November.
John Loos, property strategist at First National Bank, said: "The numbers give us an ongoing indication that it is residential mortgage advances, by far the largest mortgage category, that are largely responsible for the declining growth in the overall mortgage market."
He said this was the continuation of a trend that started back in late 2006.
The smaller commercial mortgage advances (21,5percent of total banking), still held up better, with year-on-year growth in November measuring 26,7percent.
"Despite an anticipated turn in new mortgage lending from early this year in the residential market, the leads and lags between new loans and capital repayment trends make it likely that growth in total mortgages will continue to decline throughout 2009, and could even dip into negative growth territory before it turns positive," said Loos.
Jacques du Toit, senior property analyst at Absa bank, said the decline in new loans was the result of a sharp slowdown in the residential property market during the past 12 months, while factors such as the National Credit Act and the tightening of credit criteria by banks also played a major role.
"The housing market is only expected to bottom and recover in the second half of 2009 on the back of lower interest rates and somewhat better economic growth," said Du Toit.
He said the year-on-year growth in mortgage advances was projected to continue its declining trend into the first half of this year, driven by the lagged effect of the interest rate cycle, the National Credit Act, stricter credit criteria imposed by banks, and the financial strain experienced by households during the past year.