However, it cannot yet be said that the property market is in great shape. It is clear that this is still predominantly a buyers market with most sellers settling for prices under the asking price, compared to a couple of year ago when it was only about half of the sellers settling for less. Average time on the market is still over three months compared to less than a month before 2007.

Consumer price inflation is currently sitting at 6.2%. If you subtract this from the house price inflation figure of 5.8% quoted in the FNB House Price Index, the real house price inflation rate is still negative year-on-year, despite the recent market improvement.

Are the banks to blame for the property crisis? Well, it is true that banks are key players in the property market, and thus do influence it to a degree. But they are not the major influence as some would believe. This honour goes to the far bigger global economy, to government with its array of economic policies, and to the Reserve Bank interest rate policy.

Stringent lending criteria by home loan banks have been a hot topic for quite some time now. At a stage of the property downturn, estate agents surveyed by FNB were quoting this as a major reason for weak activity levels in the property market. Around that time, banks had started restricting loan-to-value policies for new loans granted, implying an increased number of loans for which significant deposits were required. However, the banking sector was not driving the weakening property trend through these actions, The evidence of a deteriorating situation was there before this tightening in credit criteria. Therefore, rather than driving the cycle they were merely responding to a deteriorating economic and property trend, caused by the greatest global financial and economic crisis since the Great Depression, rising local interest rates at the time, and surging consumer price inflation eating into disposable income.

You see, South Africa is a very open economy. The value of SA’s exports is about a third of its gross domestic product. The significance of this is that we are extremely reliant on the global economy, and extremely vulnerable to global economic shocks, which can severely dampen demand for our exports and this curtail our economic growth. We are also highly exposed to global inflation shocks due to our high dependence on exports, and the inflation surge up until mid-2008 was predominantly cause by such imported inflation, and the SARB responded by raising interest rates. Therefore, what happens internationally flows almost freely into our economy, affecting our job market and thus our housing market heavily. Even though our local banks have been a great deal more responsible than some of the banks in more developed countries, we couldn’t avoid experiencing the severe effects of the global recession.

From a home loan bank’s perspective, defaults usually occur in the first year to year and a half after the commencement of the loan, i.e. the near term is the highest risk period for the loan. In these early stages, loan-to-value ratios are still very high, compared to an older loan where, normally, the value of the property has increased and a portion of the capital has been repaid. In these crucial first stages of the loan, the banks are exposed to the highest risk, and in the event of early default they experience the biggest loss.

Oversupplies in the market put pressure on the price of stock currently for sale. We have already established that most properties are being sold at a discount to their perceived price in the boom years. Therefore, banks have to be very careful with regard to the loan-to-values that are currently being granted. In the event of a default, the loan-to-value decision could have a very significant impact on the level of near term losses.

Property owners have a much longer investment time horizon when buying property. The risks highlighted for the banks are the biggest at the time when the customer is at his most vulnerable in the early stages of the loan, and for our industry the emphasis is largely on the short term. Property investors, by contrast, normally take a long term view on property, and some capital depreciation in the short term would probably concern many of them far less than it would a bank.

These differing objectives result in a situation where a customer wants to buy with a long-term view, while a bank is looking at the risks faced today, and a misunderstanding of these contrasting focuses are perhaps a reason as to why the banks get blamed for their so-called “pro-cyclical” behaviour.

Our economy and thus our property and mortgage market is highly reliant on the economic well-being of the whole world. Banks have a big responsibility towards customers to ensure that they practice prudent lending policies (both morally and legally). Due to this sector’s inability to fight against these far more powerful global forces, it means that a weak and fragile global economic situation would essentially require a far more cautious lending approach than the better times of a few years ago. This is not necessarily what banks want, but we believe it is appropriate under the circumstances.

Treoc has been identified as the culprits of the downfall of the Surf Trust and have been accused of fraud by the liquidators namely a particular Mr Olivier representing the liquidators. Werner Britz held a property portfolio worth R2,9 million with a monthly income of R17 000 and a monthly shortfall of R33 000. Treoc apparently handled the bond applications for the trust and are now asked to justify the application based on Werner Britz’s personal income. Many people forget prior to the implementation of NCA in June 2007 banks were throwing credit cards, loans and refinance at all and sundry to get their numbers up.

Coert Coetzee chairman of Treoc decided that enough was enough in his “Coert is nou gatvol” and in his blog on lightminded.com he lambasted the people who he believes has destroyed his reputation and challenged his methodology. This has created a wave of approval from many but also a lashback on those that disapprove of his methods.

The general media is now using one negative case to disprove a property investment methodology which has also made many people extremely wealthy on the other hand. This is sensationalism in its purest form. The general media will do anything to get readers and they know that good news does not sell but bad news does. The more dramatic it is the better it sells.

Treoc as a property education company along with other education companies like P3, YDL, Hannes Dreyer have a successful track record in creating many new property millionaire’s. Robert Kiyosaki of ‘Rich Dad Poor Dad’ fame has been doing this for over 30 years in the US and elsewhere in the world. Essentially these educators have found legal loopholes in the system to allow investors fast track their property investments in achieving financial freedom within a 5 year period in the last boom. They have also got investors to embrace property as a powerful investment vehicle particularly in South Africa where only an exclusive wealthy few were privy and beneficiaries to property wealth. Many people became millionaires through property from the last property boom. South African’s invested in poor performing RA’s, unit trusts, endowment policies that robbed investors of millions. Property was the one vehicle that could put cash into your pocket and grow in capital value.

Property investing like any business has to be run and managed well by the investor and also has its risks.Yes you can lose money if you invest without the proper education, grounding and perserverance. While there have been many successful investors who applied various types of methodologies in growing their portfolios legally there is also others who allow their emotions to run away with them. Not all investors are successful and many investors do lose money and learn many lessons along the way. Some that lose feel that there is no way back and that it is easier to play the blame game than take responsibility for their own investment future. They give up and never invest in property again and then blame the investment vehicle.

How can licenced financial planners sell you dud investments while investors and not take responsibility? The question is who is responsible for your financial freedom and future? Is it your financial planner, your accountant, your attorney, banker or estate agent? Bottom-line no matter who you take advice from you are the only person you can point a finger at ? It seems that Treoc situation will be an on-going debate and a lesson to those who probably did not take responsibility for themselves…

If you cancel your homeloan/bond within the first 2 years of your mortage you will be liable to pay penalty interest of about 1% of the outstanding bond amount. If you owe R500 000 that’s about R5000 in early cancellation penalty fees and on a R1 million bond thats R10 000 in penalties that you will need to pay which will come off your proceeds of the sale.

This cost can normally be avoided by giving the bank 90 days notice of your intent to cancel the bond. So what this means is that you need to fax a written letter or email to your bank before you even put your home on the market. Most estate agents will not tell you this but it is an important step to take when selling your property.

The 90-day notice period will only waived under the following conditions:

1. If its a deceased estate.
2. If you are been sequestrated.
3. If you are buying a new property and taking out a new bond is with the same bank.

Many sellers get confused thinking that by giving the bank 90 days notice that they are cancelling their bond in 90 days. This is NOT the case, in that if your house does not sell within that period you just need to renew your intent letter but your bond will not be cancelled until such time as the conveyancers request for cancellation figures from your bank and the conveyancers will only do this once your property has been conclusively sold and they have received all the necessary guarantees.

Click  here for a free copy of such a letter which you should send to your bank to notify them of your intent to cancel your home loan.