An investigation into the industry attractiveness of the residential mortgage origination industry for entrepreneurs in the Western Cape region of South Africa

Berman-Jacob, Denver (2008-12)

Thesis (MBA (Business Management))--Stellenbosch University, 2008.

Thesis

ENGLISH ABSTRACT: This study is entitled: "An investigation into the industry attractiveness of the residential mortgage origination industry for entrepreneurs in the Western Cape region of South Africa". The South African mortgage origination industry dates back to 1998 when Mortgage.com approached the banks to originate home loans via the Internet. The USA had seen a rise in the deployment of these websites and predictions where that the platform would outstrip physical channels. This was not to be, but this led to the establishment of Mortgage SA. The mortgage origination industry experienced rapid growth since its inception and was considered to be highly attractive in terms of revenues and opportunity. However, because of the oligopolistic structure of the industry, non-competitiveness of smaller originators ascribed to lower commission rates offered to them by financial institutions and optimal profit levels being reached, it appears that the mortgage origination industry is becoming less attractive than it used to be. The primary objective of the study was to draw conclusions on the fundamental industry attractiveness of the mortgage origination industry for entrepreneurs in the Western Cape region of South Africa. Secondary objectives included; determining whether the mortgage origination industry is still a viable or profitable industry for entrepreneurs to explore, examining the current state of the mortgage origination industry, investigating the key issues and problems facing the mortgage origination industry and establish the entry and exit barriers as well as the feasibility of the industry for new entrants. This study was a culmination of literature from various sources, researching theories, views and perceptions regarding mortgage origination in South Africa. Various websites, newspaper articles, journals and books were used as part of the research process to deepen the researcher's understanding of the mortgage origination industry, its roles and functions. Secondary research was conducted in the form of a literature review which provided a better understanding of the mortgage origination industry, provided an introduction to industry attractiveness and provided a basis for the primary research. Primary research was conducted by means of personal one-to-one interviews with key decision makers from a predominantly external (client) as well as an internal (mortgage originator) perspective. To avoid bias and ensure an overall perspective of the industry, it was important that the sample be reflective of role players involved in the mortgage origination process, including home buyers (investors), estate agents, mortgage originators, lawyers and lenders (banks). The methodology employed for the purpose of the study was qualitative. The interviews were conducted by means of using a discussion guide and were based on the respondent's personal experience with the industry as a whole. To answer the research question as set out in the research problem as well as fulfil the objectives of this study, it was essential that the selected sample be representative of stakeholders in the mortgage origination industry, and a purposive or judgemental sample was selected using non-probability sampling. Overall, the mortgage industry is not as attractive as it used to be, yet it cannot be deemed to be completely unattractive either. On an average the industry is attractive. The research hypothesis can, therefore, neither be accepted nor rejected with confidence. Considering the current economic climate and market conditions, one would be tempted to reject the research hypothesis, but a positive economic turn would cause the industry to become attractive again. Finally, it is recommended a more detailed analysis of the industry be conducted. The methodology employed for the purpose of this study was qualitative, as exhaustive quantitative research was not required. Furthermore, it is recommended that a quantitative approach be utilised to verify the results of the study. Furthermore, it is also recommended that the mortgage origination industry be analysed in terms of its fundamental attractiveness every one to three years, as strategies need to be re-examined as events unfold. An accurate diagnosis of the industry is necessary for deciding on a sound long-term direction, setting appropriate objectives and crafting winning strategies.

AFRIKAANSE OPSOMMING: Hierdie studie se titel is: "'n Ondersoek na die industrie-aantreklikheid van die residensiele verbandopnemingsindustrie vir ondernemers in die Wes-Kaapse streek van Suid-Afrika". Die Suid-Afrikaanse verbandopnemingsindustrie dateer terug na 1998 toe Mortgage.com die banke genader het om huislenings op te neem via die Internet. Die VSA het 'n toename in die aanwending van sulke webtuistes ervaar en daar is voorspel dat hierdie platform fisiese kanale sou verbysteek. Dit het nie gebeur nie, maar dit het tot die stigting van Mortgage SA gelei. Die verbandopnemingsindustrie het vinnige groei sedert sy stigting beleef en is gesien as hoogs aantreklik ingevolge inkomste en geleentheid. As gevolg egter van die oligopolistiese struktuur van die industrie, die gebrek aan mededingendheid van kleiner opnemers wat toegeskryf is aan laer kommissiekoerse wat finansiele instellings aan hulle aangebied het en optimale winsvlakke wat behaal is, kom dit voor asof die verbandopnemingsindustrie minder aantreklik raak as wat dit vantevore was. Die primere oogmerk van die studie is om tot gevolgtrekkings te kom oor die fundamentele industrie-aantreklikheid van die verbandopnemingsindustrie vir ondernemers in die Wes-Kaapse streek van Suid-Afrika. Sekondere oogmerke sluit in om vas te stel of die verbandopnemingsindustrie steeds 'n lewensvatbare of winsgewende industrie is vir ondernemers om te ontgin, om die huidige status van die verbandopnemingsindustrie na te gaan, om die sleutelkwessies en probleme wat die verbandopnemingsindustrie raak, na te vors en om vas te stel wat die binnekoms- en verlatingsversperrings is, asook hoe uitvoerbaar dit vir nuwe toetreders is om tot die industrie toe te tree. Hierdie studie was 'n samevoegingspunt van literatuur vanuit verskeie bronne, navorsingsteoriee, menings en persepsies aangaande verbandopneming in Suid Afrika. Verskeie webtuistes, koerantartikels en boeke is geraadpleeg as deel van die navorsingsproses om die navorser se begrip van die verbandopnemingsindustrie, sy rol en funksies te verdiep. Sekondere navorsing is onderneem by wyse van 'n literatuuroorsig wat 'n beter begrip geskep het van die verbandopnemingsindustrie, 'n inleiding tot industrie-aantreklikheid verskaf het en ook 'n basis vir die primere navorsing daargestel het. Die primere navorsing is onderneem by wyse van een-tot-een onderhoude met sleutelbesluitnemers vanuit 'n oorwegend eksterne (klient) asook 'n interne (verbandopnemer) perspektief. Om bevooroordeeldheid te vermy en 'n oorhoofse perspektief van die industrie te verseker, was dit belangrik dat die steekproef verteenwoordigend van die betrokke rolspelers in die verbandopnemingsindustrie sou wees, insluitende huiskopers (beleggers), eiendomsagente, verbandopnemers, prokureurs en leners (banke). Die metodologie wat vir die doel van die studie aangewend is, was kwalitatief. Die onderhoude is gevoer deur middel van die gebruik van 'n besprekingsgids en is gebaseer op die respondent se persoonlike ervaring van die industrie as 'n geheel. Ten einde die navorsingsvraag te beantwoord, asook om te voldoen aan die oogmerke van die studie, was dit noodsaaklik dat die geselekteerde steekproef verteenwoordigend moes wees van die belanghebbendes in die verbandopnemersindustrie. 'n Doelgerigte of beoordelende steekproef is gekies met gebruikmaking van 'n nie-waarskynlikheidsteekproef. Oorhoofs is die verbandindustrie nie meer so aantreklik soos vroeer nie, maar dit kan egter ook nie as totaal onaantreklik gereken word nie. Die industrie is gemiddeld aantreklik. Die navorsingshipotese kan dus met vertroue nog aanvaar nog verwerp word. Met inagneming van die huidige ekonomiese klimaat en markomstandighede, sou mens geneig wees om die navorsingshipotese te verwerp, maar 'n positiewe ekonomiese opbloei sou weer daartoe lei dat die industrie aantreklik word. Dit word laastens aanbeveel dat 'n meer gedetailleerde analise van die industrie onderneem word. Die metodologie wat vir die doel van die studie gebruik is, was kwalitatief, aangesien uitvoerige kwantitatiewe navorsing nie nodig was nie. Dit word verder aanbeveel dat 'n kwantitatiewe ondersoek onderneem word om die resultate van die studie te verifieer. Dit word ook aanbeveel dat die verbandopnemingsindustrie elke een tot drie jaar geanaliseer word ingevolge sy fundamentele aantreklikheid, aangesien strategiee telkens beproef behoort te word namate gebeure ontvou. 'n Akkurate diagnose van die nywerheid is noodsaaklik om op 'n gesonde langtermynkoers te besluit, om op gepaste doelwitte te besluit en om wennerstrategiee te formuleer.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/5680
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