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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%) 

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