Saturday, 29 November 2008

‘For the times, they are a-changin’.........maybe

Even when you read these words above, the whiny voice of Bob Dylan pops into your head willing you to sing along even if you don’t want to. Compare this to the current property situation, the questions remain: 

Are the times for property really changing?

Or are things going to get a lot worse before they get better?

For the past 2 years, interest rates have been increased 10 times in order to curb the inflation monster. Current prime rate stands at 15.50% whilst inflation has peaked at 13.6% (a far cry from the projected 3%-6% margin set by the SARB) The Rand has devalued by 40% this year alone & our political situation leading into the 2009 elections, seems wonky at best.

But to every cloud there is a silver lining? Maybe.......

In the past few months, USA, Australia, New Zealand, the European Central Bank, Turkey and even England have cut their interest rates in order to prevent the looming global recession. So why is South Africa the odd one out?

Trevor Manual has said that the impact of the global recession still has to be absorbed into the economy, and therefore a ‘wait and see’ attitude is currently held. But with real estate agents down 50% (maybe not such a bad thing), stock market down, platinum down & business confidence down, maybe it’s time to light the fires & burn the tires !!

(As long as the Rand doesn’t weaken more to negate the expected rate decrease)

The MPC meets on 11/12 December.

Let’s hope they take a feather out of the cap of the Springboks victory against England, by defying the odds & putting the market on course for a recovery leading into 2009.

Please Uncle Tito, how about an early rate cut to get us into the Christmas spirit........

Tuesday, 18 November 2008

South Africa Property Review - From Politics to the Property Market

You must be living on the moon if you haven’t been keeping up to date on the political situation in SA: From the ‘Shikota Express’ to the ‘ANC’s jitters’ over the dissident walkout, the 2009 General Elections is shaping up to be a humdinger !!

And with this change in the political landscape, the property market braces itself for either another interest rate that remains unchanged, or an interest rate reduction (The oldest trick in the book in garnering votes just before a general election :

Thus, these questions remain: 

How long will Tito Mboweni ignore global sentiment and keep interest rates unchanged? 

Will the weakness of the Rand prevent an interest rate reduction? 

Will the recent decline of inflation from 13.6% to 13% in August 08 swing the vote in favour of an interest rate reduction? 

But not all is gloom and doom, and within such a market we are currently experiencing, buying opportunities abound for investors with liquidity. Expect prices to fall a further 10% going into mid-2009 which should then be a turning point, when the availability of credit becomes more freely available after a few interest rate reductions. (we hope !!) 

Suffice to say, the forecast for 2009 is not one that is painted with roses and petals, and more pain is yet to come for homeowners. But I can see the market ‘bottoming out’ in mid-2009 after the first interest rate reduction in the first quarter of 2009. 

A full recovery is expected by end 2009 and leading up to the ever-important 2010 World Cup, growth should be back in the black. 

Monthly Indicators: 

Prime Interest Rate = 15.50% (Last Year: 13.50%) 

ABSA House Price Index = 1.2% (Last Year: 13.6%) 

FNB House Price Index = 4.1% (Last Year: 8.8%) 

Standard Bank House Price Index = 2.5% (Last Year: 10%)