The credit crunch could prove be a blessing in disguise as South Africans are set to return once again to a culture of saving — a process that will add significant strength and substance to the wealth building role of home ownership.

The Reserve Bank's March quarterly bulletin shows that South Africa's savings ratio rose to 16.9 percent of gross domestic product (GDP) in the fourth quarter of last year, from 14.3 percent in the first quarter.

This was mainly due to improved saving by the corporate sector. Household savings were still negative at 0.2 percent of GDP.

The improved saving ratio lowered SA's dependence on foreign capital for financing investment to 25.7 percent in the final quarter of the year from a peak of 38 percent in the first quarter.

Even though credit demand is slowing sharply, the ratio of household debt to disposable income edged up to 76.4 percent in the final quarter of last year — not far from a record peak of 78.2 percent in the first quarter of that year.

Tight-fisted mortgage lending policies

"At the bonded end of the residential property market, the process is being driven by the tight-fisted mortgage lending policies of banks — which now generally require home buyers to put on the table deposits of as much as 30 percent — and by the dampening effects on household budgets of the tight restraints imposed by the National Credit Act," says Ronald Ennik, MD of Pam Golding Properties' Gauteng division.

Ennik says that while the uncompromising reticence of banks to advance mortgage finance may well be bitter medicine for aspirant homeowners right now and in the immediate future, it heralds a return to the days when a house was a true store of value for its owner.

"Put another way, the days of 100 percent mortgages are all but gone," he says.

"We are now seeing the beginning of a process that will take the 'smoke and mirrors' out of home ownership and return it to the (normal) situation where people who buy homes can actually afford them," Ennik says.

Foster a culture of savings

As equity-based home ownership takes hold, it is expected to foster a far more widespread culture of savings in the country — not least among the country's younger generation who have grown up in a consumption-driven climate unaware of the virtues or the necessity of saving.

"Furthermore, by having meaningful equity in their properties, home owners will be motivated to act more responsibly by taking proper care of their homes and by not defaulting on bond repayments," Ennik says.

"By doing so, they will avoid the prospect of losing their hard-saved deposits ... in a forced sale or auction."

Ennick says this contrasts sharply with the past when, if there was no financial "uphill" in acquiring a house, there was certainly no "downhill" in losing it.

A more savings-focused mindset

"The enforced process of putting more equity into home bonds will ripple into other areas of wealth creation and money management — engendering a more savings-focused, debt-averse national mindset and promoting better, more disciplined control of household purse strings," Ennik says.

He says there is no question that intensification of saving is absolutely essential if SA is to achieve sustainable economic growth.

"The strong, deep-rooted savings culture of countries in the east sets a good example for us to follow.

"For instance, the total savings to GDP ratio in India is almost 30 percent, while in China it nudges a whopping 50 percent — whereas in SA it is a paltry 15 percent".

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