Bad Debts Occur More in Homes Worth Over R2.5m

March 4 - Absa has broken the myth that more bad debts occur in the affordable housing market than in the upper segments of the South African property market.

In fact, reports Absa, most bad debts these days originate from owners of properties worth R2.5 million and over.

According to the Managing Executive of Absa Home Loans, Luthando Vuthula: "On home loans, the biggest impairments are being incurred on people without deposits, vacant land and properties greater than R2.5 million."

Vuthula said that there is a lot of demand in the affordable housing market, especially among people earning up to R15,000.

He also said that houses worth anything between R500,000 and R1.5 million have been an area of growth for the group.

"We have a lot of demand there and again it's an affordability thing - people can afford properties up to R1.5 million," he explained.

The senior property analyst at Absa, Jacques du Toit, said that there were risks in the upper segment because their levels of debt were higher than the lower income segments.

"It is not actually correct to say that your lower income groups are actually where you have the risks," said du Toit.

Absa reported a swing to profit in its full year report of 2010, compared to a R1 billion loss in 2009.

Absa has the biggest market share in South Africa's mortgage industry and reported headline earnings of R125 million in its home loan divisions for 2010.

3/4/2011 9:55:52 AM