Liquidity rules for banks eased

The world's top banking regulatory body, Basel, announced early January that it has eased the global liquidity rules for banks, and this should improve their chances of surviving financial crises.

Lanice Steward, managing director of Knight Frank Anne Porter, said that the easing of global rules for banks' liquidity, due to be implemented in 2015, is a positive sign for the economy. This is of particular importance when it comes to mortgages, she said.

The Basel III standards had initially been proposed in 2010 but the banks and financial institutions lobbied for more flexible criteria and lower costs for the sector.

The question that is asked though is why it would have an impact on property?

Steward says that the banks having more liquidity will mean they have more funds that can be released into the market, i.e. more loans available as more cash available.

The Liquidity Coverage Ratio was drafted to protect the banks and avoid a repeat of the 2008 crisis, the provisions of which includes a broader definition of the minimum assets every bank must hold, making it less costly for them to maintain the stipulated buffer.

"Although this will not have a direct impact on the market," said Steward, "this shows more confidence in the economy and this would be in line with cyclical nature of property, where over the last 30 years it has shown that the "3s" (e.g. 1993, 2003 etc) were usually years in which there was an upturn in the property market."

"We should, however, not be disheartened by top economists showing a negative forecast for the year's average annual house price inflation."

What is more important, she said, is the activity in the market, which is "most definitely present in the Western Cape", particularly in the areas in which Knight Frank Anne Porter operate – the Southern Suburbs, Atlantic Seaboard and the City Bowl.

In a small reporting area according to PropStats, the Institute of Estate Agents, Western Cape, property data input service, the activity from October 2011 to October 2012, shows an increase.

"All the indications are there that 2012 was a better year than 2011," said Steward, "and it looks to us as if 2013 is going to be even better. Our team is already on target for this year, and there has been much more activity in the marketplace."

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