South Africa’s property sector is experiencing a slowdown especially in the unlisted sector; this is according to Gary Palmer, Chief Executive of Paragon Lending Solutions.
According to reports, the investment property sector decreased in 2014 by three percent compared to the previous year.
Analysts attribute this to the increasing amount of property finance applications that are being declined by commercial banks as a result of stringent lending regulations which they need to adhere to.
“Market is softening on the residential side and as a lender one should keep a close eye on this,” added Palmer.
Paragon Lending Solutions which lends space to commercial property, residential and prospective property owners said a lot of people were renting as they could not afford to buy their own properties.
“The economic growth is very pedestrian so many of the companies at the lower level are struggling,” he added.
“On the ground with smaller commercial property owners, some of the businesses such as small to medium enterprises (SMMEs) have started defaulting and arrears have started to pick up.”
Paragon which also does a lot of lending for property developments on the commercial side said the company has been taking secondary property as security to fund businesses.
“When residential property owners are looking for funding, we go through Ooba and Better Bond to assist them with funding,” he said.
“The market is slowing and there are concerns around property values both commercial and residential.
Palmer said there seems to be a lot of activity in the listed property space with great yields and high distributions. This was different at the lower end of the sector.
“A lot of the individuals have had their disposable incomes being affected with small businesses being stretched,” he added.