In: Root » Legal and finance » Loans and mortgages
Secondary Mortgage Markets in South Africa South Africa is the home country of Africa's biggest banks,1 but about 37% ofits 47 million inhabitants are unbanked. The residential mortgage market is well developed, but the vast majority ofSouth Africans do not have access to mortgages. Extreme contrasts such as these are characteristic for the most southern country in Africa in general, and the mortgage banking industry in particular. The concept of'mortgage' has been known for more than a hundred years in South Africa. The South African financial system is well developed and rivals most Western European countries. Due to a sound legal structure in terms of title and foreclosure, mortgage security in South Africa is as good as in the UK. Changes in legislation, combined with a stable political environment and favourable economic and property market conditions since 2000, have resulted in an exponential growth in securitization. The results have been an increased sophistication ofthe South African financial system and the development ofyoung, but sophisticated, residential and commercial secondary mortgage markets. Commercial mortgage backed securitization (CMBS) has been an important development in the South African property finance field. Since November 2004, four single-borrower CMBS programmes have been set up in South Africa. While this may not seem a significant number of transactions, CMBS has been a catalyst for two things: greater competition between South African financial institutions and the further creation of innovative commercial property financing products (Madison Property Fund Managers, 2005). According to market participants, CMBS has been a 'wake-up call' for banks. To retain their property company clients, banks had to reduce the margins on their commercial mortgage loans. When the first 2 CMBS programme was launched, bank margins were at 180-250 basis points above the Johannesburg Interbank Agreed Rate (JIBAR). Currently, the bank margins are between 100 and 170 basis points. Because the commercial property market is currently overtaking its residential counterpart in terms of dynamism and growth, and CMBS represents the latest innovation in the South African securitization market, this chapter focuses primarily on the highly dynamic and innovative CMBS market. However, as Residential Mortgage Backed Securities (RMBS) dominated the development phase ofmortgage backed securitization in South Africa, an overview ofmain RMBS characteristics and trends is given after a brief discussion ofunderlying economic, property and primary mortgage market fundamentals.
|
|||||||||||||
Disclaimer
1) E-articles is not responsible for the information contained by this article as well for any and all copyright infringements by authors and writers. E-articles is a free information resource. If you suspect this article for any copyright infringement, please read the terms of service and contact us or use the "Report this article" button on this page to investigate the problem.
2) E-articles is not responsible for inaccuracies, falsehoods, or any other types of misinformation this article may contain and will not be liable for any loss or damage suffered by a user through the user's reliance on the information gained here. |
|||||||||||||
