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Cash sales on the rise in residential market

By Simpiwe Piliso | Jul 14, 2009 | COMMENTS [ 0 ]

CASH is king in South Africa's residential property market.

According to the country's top property transfer guide, one in three homes are bought for cash.

Though some of the banking groups are busy reviewing their strict lending criteria regarding home loans, a growing number of property seekers are reverting to cash purchases.

Banks were responding to the global credit crunch and the tougher local economic conditions by tightening up significantly on their lending criteria.

According to The Knowledge Factory, which compiles the SA Property Transfer Guide, the cash sale trend started last year.

Dieter Deppisch, Knowledge Factory's national manager of property data research, said: "Cash sales of full title and sectional title properties rose to one in three sales during the current year."

Hard cash was forked out mainly for properties valued at between R500000 to R2million.

Deppisch said the introduction of the National Credit Act (NCA) in June 2007 was a major catalyst for the decrease in the ratio of bonded sales to cash sales.

"As expected, the NCA and subsequent tighter lending criteria have driven cash sales upward ... and, according to the largest bond originator in South Africa, only one in two (or 50,5percent) potential buyers applying for bonds are currently being approved," said Deppisch.

Another mortgage originator, Bond Choice, confirmed that there had also been a drop in actual home loan applications being submitted.

Sales managing director Kevin Mountjoy said: "Bond Choice has witnessed a growing demand for second-hand residential properties such as repossessed homes."

Repossessed properties are being snapped up by buyers paying in cash, according to The Knowledge Factory.

Three years ago Absa, Standard Bank and First National Bank had less than R100million worth of homes on their books. Now the country's biggest banks are sitting on properties worth about R1,5billion.

Deppisch said he had observed record turnouts at auctions.

"With repossessions on the rise, the fortunate few that have sufficient liquidity are picking up bargains at auctions."

"Property is no get-rich-quick scheme but is being favoured as a safe haven that will yield healthy returns in the long term."

Deppisch said he also believed the latest trend of cash sales was being magnified by growing numbers of estate agents actively targeting cash buyers.

"Though foreign cash buyers do feature, the vast majority of deals in this sector involve local buyers."


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