100 reasons to smile

Thu, 28 May 2009 16:18

The Monetary Policy Committee of the SA Reserve Bank (SARB) has cut the repo rate by 100 basis points, Governor Tito Mboweni said on Thursday.

The repo rate now stands at 7.5 percent while prime has been reduced to 11 percent.

This is the SARB's fourth rate cut this year.

Mboweni said the SARB's most recent consumer price inflation forecast showed a relatively unchanged outcome for the near-term as compared to that presented to the previous meeting of the MPC.

"Over the longer term, there appears to be a moderate improvement," he added.

This forecast, Mboweni noted, was similar to the Reuters consensus forecast of private analysts who expected inflation to average 6.9 percent and 5.7 percent in 2009 and 2010 respectively.

Mboweni said the main upside risk to the inflation outlook came from cost-push pressures, in particular from electricity price increases.

"Eskom has applied to the National Energy Regulator of SA for a 34 percent interim increase in electricity tariffs, but there is still uncertainty about the final adjustment," he said.

A number of municipalities had already budgeted for significant electricity price increases in anticipation of higher Eskom tariffs, Mboweni noted.

According to the governor, in line with the less negative global outlook, there had been a moderate recovery in international oil prices.

"North Sea Brent crude oil has been trading at prices of around $60 per barrel during the past days, compared with an average of around $50 per barrel during April.

"These developments may result in a moderate increase in the domestic petrol price in June," he said.

The impact of the higher international prices on domestic petrol prices had been partly offset by exchange rate movements during the month, Mboweni said.

He added that food price inflation remained well above average inflation, and had been lagging the favourable developments at the producer price level and in the spot prices of agricultural commodities.

"Food price inflation measured 17.9 percent in August 2008 and has been moderating persistently, but slowly, since then," the governor said.

Sapa

Too early for a British Summer ??

Summer is without a doubt the most anticipated & talked about event in the British calendar. If the Poms spent half the time preparing for summer, and focus the other half on their football, then maybe they’d be able to win another World Cup…….and so relive the glory days of 1966 (was a cheapshot, I know :)

So why the big hoohah? Cos the British summer, is just so flippen short……. 

The big talking point of the last few months has been the expected reduction of interest rates. The SARB has even gone so far as to increase the number of meetings to be held in order to, and here I quote ‘To allow for more effective planning and quicker reactions to changes in the economy’. (I think to the members of the MPC, it means more buffet lunches) 

But will any kind of reduction in interest rates prove to be a British summer for the current property market? The short answer is unfortunately, no. The real dampener is the difficulty in obtaining credit from commercial banks. But this is to be expected when there’s an increase in the unemployment figure, as well as another negative growth forecast for the second quarter of the year. And with house price growth at a reported -5% year-on-year, we are still not out of the woods…….by a long shot !!

So what can be done? Popular opinion is that the SARB will cut prime interest rates to 10.5% by the end of the year. But seeing as each interest rate cut takes about 6 to 9 months, to work itself through the economy, this is not the short term answer.

Therefore, it seems as if everyone is taking a ‘Look and See’ attitude coupled with what happens domestically as well as globally.

So without further ado, get out your swimming trunks, splash on some sunscreen and hit the beach (or river), cos anything is a lot better than nothing.

www.horizon-consultancy.com

Get used to the downswing, so that the upswing won’t give you Vertigo.....

Is it just me or is the world wallowing in the global economic crises? 

Every time you switch the channel to Sky / CNN or BBC you hear of unemployment, negative growth, repossessions, etc. Are things really that bad? And are we really approaching the worst recession since the 1980’s when the international community shunned us because of our political policies? The simple answer is unfortunately…………….………yes. 

Forecasts by Economists (here come the predictions) set our GDP growth………....sorry, our GDP decline to be in the region of -10% for 2009. And as pure economists, they always leave you with a ‘silver lining’…. but this may improve to -8% toward the end of the year. (What the hell does it matter when you’re looking at negative growth !!!)

In the property market, our commercial banks continued to restrict lending. This increased the average bank decline ratio (How many mortgage applications are declined after being submitted) to 60% !! As for deposits required to secure your property, the average deposit required was 24% compared to 16% last year. (If these figures don’t make you ill, then nothing will………)

With the potential for more interest rate cuts on the way, under such dire global and domestic economic conditions, it’s unlikely that reductions will even get the residential market out of bed. Let’s hope things improve, even though I have a sneaking suspicion that it’s going to get worse before it gets better. 

In conclusion, just a few words on this month’s election: 

Remember, that in our amazing democratic country, you the voter have the right to choose. No matter what the outcome, YOUR vote has power. So whatever your decision is, make sure that it’s based on what you believe to be right, as it not only affects you, but millions of South Africans worldwide. 

Hundreds, Bru !!

The Monetary Policy Committee of the SA Reserve Bank has cut the repo rate by 100-basis-points, Governor Tito Mboweni said on Tuesday.

The repo rate now stands at 9.5 percent while prime has been reduced to 13 percent.

"The global economy has continued to weaken significantly in recent months as a result of the turmoil in the financial markets.

"There is growing uncertainty regarding the depth and duration of the economic slowdown," Mboweni said.

He added that the South African economy had not escaped the impact of these developments, and domestic production had contracted as a result of weak domestic demand and a significant decline in export demand.

"Against this backdrop of widening domestic and global output gaps, the balance of risks to the inflation outlook has changed somewhat," he said.

Mboweni said that inflation — as measured by the reweighted and reconstituted consumer price index (CPI) for all urban areas — measured 8.1 percent in January 2009.

Food and non-alcoholic beverages prices, which increased at year-on-year rates of 15.7 percent in January, contributed 2.4 percentage points to total inflation.

The housing and utilities category contributed 2.1 percentage points, and together with food accounted for more than half of the measured inflation increase, Mboweni said.

The transport component had a minimal impact on the overall CPI as a result of the 20.3 percent reduction in petrol prices during January.

Producer price inflation, which reached 19.1 percent in August 2008, continued its downward trend, he said, measuring 9.2 percent in January 2009.

Despite the depreciation of the rand during 2008, producer prices of imported goods declined at a year-on-year rate of five percent in January.

Turning to the inflation outlook, Mboweni said the most recent central forecast of the Reserve Bank showed a near-term deterioration in the inflation outlook but a more favourable trend was forecast for the medium term, which was the relevant time frame for monetary policy.

Consumer price inflation was expected to average 8.1 percent in the first quarter of 2009 and then to decline to below six percent in the third quarter of the year.

As a result of technical base effects, inflation was then expected to marginally exceed the upper end of the inflation target range, before returning back to within the range in the second quarter of 2010.

It should remain there until the end of the forecast period in the fourth quarter of 2010, when it was expected to average 5.3 percent.

"The heightened levels of uncertainty and the rate of change of global developments make these forecasts subject to higher risk than is usually the case," Mboweni warned.

He said the inflation outlook had been dominated by the continued weakening of the global economy and financial markets, notwithstanding significant monetary and fiscal measures introduced by central banks and governments.

"The decline in global demand has resulted in a marked contraction in international trade," he said.

He reminded South Africans that the International Monetary Fund, which in January was forecasting global growth to average 0.5 percent in 2009, now expected the global economy to contract by up to one percent in 2009.

"Numerous industrialised and developing countries are already experiencing negative growth.

"World inflation is being restrained by declining demand and lower commodity prices which are expected to remain subdued under these conditions of negative or low growth.

"The weak global demand has been reflected in the export performance of the South African economy and domestic demand conditions had also deteriorated further," he said.

"Domestic demand conditions are expected to remain under pressure as a result of declining disposable incomes, tighter credit conditions and negative wealth effects."

Mboweni said the upside risks to the inflation outlook emanated primarily from cost-push pressures, particularly from administered prices.

"These include possible higher-than-expected electricity tariff increases," he said.

The decline in inflation might also be delayed by continued high rates of increases in food prices, despite marked declines in producer price food inflation, Mboweni said.

How to survive the Credit Crunch??

If I had £1 for every time I either heard the words ‘Credit Crunch’, then this so-called recession would be the furthest thing from my mind (cos I’ll be sipping pinas coladas on my yacht somewhere in the Caribbean :)

On average, economic recessions occur once every 7-10 years. And yet, with this ability to predict when the brown stuff will hit the fan, shouldn’t we be less surprised when we find the world in economic turmoil?

Wasn’t the last time bad enough? Or do you simply choose not to remember the last time?

So without pointing fingers at Economists (What do they know?), Bankers (greedy bunch!), Presidents (yes, Dubya !), Prime Ministers (yes, Mr Brown !) or your cat (no kicking please !), let’s look at some tips on how we can lessen the burden of this recession, so that when the next one comes along, we are ready for it !!

(Or, I can just copy and paste this article 7-10 years from now :)  

United Kingdom

Do you like free cash?

The Problem:

Almost 35% of all UK employees are eligible for a tax refund (no jokes!!) & every one of these employees can claim their tax for the last five years (even Saffers who have left the UK!!)

So why doesn’t everyone claim this moola when they leave? Cos, they’re either don’t know about it or they’re just too damn lazy !! And what would this refund cost me? A massive………£0 :)

The Solution:

There are 3 ways in which you qualify for a tax refund:

1) Earnings – Where your annual earnings were less than the personal tax free allowance.

2) Employment - You haven’t been employed for the full tax year.

3) Tax Code - You’ve been taxed under the wrong tax code (Duh!!).

You can always apply for a free assessment……….What have you got to lose?

Notable link:

http://www.horizon-consultancy.com/claimyourukrefund.html

International

Sending money to Mama?

The Problem:

Every single day, millions of people send money overseas. Once they’ve decided on a vendor they rarely change even if the rate / speed / security of the transaction is not the best possible.

But how does a better exchange rate help me when I’m only sending £100 at a time? You might only save £1 on every £100 per transaction, but multiply this £1 with every transaction you’ve ever done…………..I think you get my point :)

The Solution:

Currency Traders are trade worldwide currencies on a daily basis. Where commercial banks might give you a weekly average exchange rate, currency traders give you the exchange rate on that particular day of trading. Their fees are also a LOT lower than banks !!

So, the question remains, When will you see the light and make the change?

Notable link: 

http://www.horizon-consultancy.com/sendyourforex.html

And a few more tips on how to save:

- Work out a proper budget (not on the back of a cigarette packet !!) as you need to look at everything you spend to get a true picture.

- Take a packed lunch to work, skip the Pret sandwiches & save about a fiver a day (If you also skip the daily Latte you’ll save £10 a week !!)

- Change credit cards, switch them to a ''balance transfer offer" that stays at a low interest rate until the debt is repaid.

- Ditch the rugby / football / cricket season ticket (I know this one will be the toughest!!) or at least split the cost with friends. After all, how many of those midweek fixtures will you actually attend?

- Cancel the Gym membership, as many leisure centres offer membership schemes, have personal training & are kitted out with the full range of equipment. (Or you can go for a run which will save you £50 per month)

- Invest in energy-efficient light bulbs as they last about 10 times longer than ordinary ones (not because they’re made by Duracell batteries), and cost about £3. (You’ll save about £7 on your annual electricity bill)

With all this money saving tips in mind, I think the most important thing to remember is to remain positive. Every economic recession is part of a cycle, and as with every cycle, it will turn and revert back to positive growth & optimism.

 As Oscar Wilde once said, ‘All of us are in the gutter, but some of us are looking at the stars’.

Stop. Learn. Do - The DIY Approach

They always say time changes things, but you actually have to change them yourself - Andy Warhol

Five months ago I asked a few so-called 'web design professionals' to give me a quote of what a new website would cost Horizon. Quotes came in starting at £1000 and went all the way to £2500 (What were they thinking??)  

All I needed was 3 sections consisting of International Property, FOREX and UK PAYE refunds which should be integrated into Aweber (our autoresponder) How difficult was that ??!!

So nothing ventured gained, nothing gained...........I proceeded to learn how to do it myself. Now I know what you're thinking, What the hell was I doing??!! Leave the technical stuff to the pros and get on with the marketing / advertising / promotion of your company !! 

Our web server, 1and1.co.uk has a limited website builder, but it was with this that I started to experiment. From template, images input to the actual process of programming............

Five months later I have learnt to build a website from scratch (no jokes that it was a long, hard slog !!). So without further ado, have a look at the new and improved Horizon Consultancy website:

www.horizon-consultancy.com

Any thoughts, ideas of comments are most welcome !!

The night is darkest before the dawn..........thanks Batman.

Oil price, Interest rates & food prices set to decrease…………but so will the value of your home according to some analysts.

For all we know, these so called ‘analysts’ could be the weatherman taking a blind stab at predicting  those clouds on the horizon to be a storm coming / going / never was. (Roulette was never so much fun J) Therefore, sometimes they’re on the money………and sometimes they sidestep their fallibility by using the ‘We could never have predicted the current situation’ line. 

So without taking the moral high ground, here are my thoughts on what’s to come for the property market in the first half of 2009: 

1)      Interest Rate decrease in February 09 (followed by another in June 09):

a.       The MPC meeting in April 09 is tricky, because a change might be controversial as it might smack of the ANC trying to garner votes for the April Elections.

b.      But the SARB is supposed to be autonomous from the ruling party, so we’ll have to wait and see if this is actually the case.

2)      Inflation will fall & return to single digit territory, where it will better reflect the 3 to 6% inflation band set by the SARB:

a.       Holding thumbs that the Rand will not weaken against world currencies & that the oil price remain steady, inflation will remain steady throughout the first half of the year.

3)      Growth will remain in single digits:

a.       Interest rate reductions will provide welcome relief to homeowners & will somewhat revive the residential property market………..but not for long.

b.      Weak economic growth will negate these reductions due to the global economic recession.

4)      April Elections will play a major part in all facets of the market:

a.       The rise & rise of COPE these past few months have the media in a frenzy (another weatherman?) but the political changes won’t be on a wholesale basis. (not until 2014)

b.      The DA will take the Western Cape, COPE will take the Northern Province……but the ANC will still take victory (without their two-thirds majority)

‘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........

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%) 

Panama – The Land of Canals and Hats

Fast Facts

· 3rd Largest Economy in Central America.
· There are no restrictions on ownership of property by foreigners.
· Foreigners may engage in commerce or industry without limitations.
· Capital: Panama City
· Population: 3.3 million
· Currency: Panamanian Balbao

Economic Overview

‘If I buy a condominium, do I get a free panama hat? And can I swim in the canal or must I wait for the boats to go past?’ Don’t you just love those stupid tourist questions………..

Panama, officially the Republic of Panama, is the southernmost country of Central America. Situated on an isthmus, some categorize it as a transcontinental nation, connecting the north and south part of America. It is bordered by Costa Rica to the north-west, Colombia to the south-east, the Caribbean Sea to the north and the Pacific Ocean to the south. It is an international business center which also acts as a transit country. Although Panama is the third largest economy in Central America, after Guatemala and Costa Rica, it has the largest expenditure on resource consumption, making the country the largest consumer in Central America.

Because of its key geographic location, the economy of Panama has a mixed-western economy mainly based on the services industry, heavily weighted toward banking, commerce, and tourism.

Panama's economy is based primarily on a well-developed services sector that accounts for nearly 80% of its GDP. Services include the Panama Canal (no surprises there J), banking, the Colón Free Trade Zone, insurance, container ports, and flagship registry, medical and health. While the country's industry includes, manufacturing of aircraft spare parts, cements, drinks, adhesives, automobiles, textiles and more recently, handmade artisan creation of Bush planes (No, this is not the George W variety…..).

Panama has the third highest GDP per capita in Central America and GDP growth for 2007 was 8.1% compared to 6.5% in 2006 (that’s some serious growth !!)

Property Market Review

The real estate frenzy in Panama continues as more major developments are underway. The country is busy re-inventing itself as Latin America’s regional logistics and services hub.

Around 300 tower projects, making up more than 40,000 units, are reportedly being constructed or publicly announced. Even the Trump Ocean Club International Hotel and Tower, part of Donald Trump’s (the big man himself !) $400-million project in Panama City, has started construction.

During the 1970s an offshore financial industry flourished in Panama but then came the dark years of the rule of Manuel Noriega (Dictator, Ex-CIA, Ex-Spy……I think you get the point) who was toppled by an American invasion in 1989.

In 2004, Martin Torrijos defeated ex-president Guillermo Endara. In October 2006 Torrijos’ referendum to expand the Panama Canal was massively supported with the cost of expansion being close to $7.5 billion and is expected to be completed in seven years time.
Several other mega-projects are in the wings:

· Panama has signed an agreement with Qatar for the construction of a US$7 billion oil refinery in Puerto Amuelles.

· A consortium led by Hong Kong’s Hutchison Whampoa, plans to turn Balboa into the largest port in Latin America.

· China's government-owned shipping operator, COSCO, in alliance with Ports America Group, is to build a second megaport on the Pacific coast at Farfan (even though Panama recognizes Taiwan :)

However, the current problems in the US appear to be moving south (as is the rest of the world at the current moment!!) with Panama's economic growth decelerating sharply during the first quarter of this year from 6.9% which is well down on the 10.41% economic growth during the same period of 2007.

Home-grown obstacles to growth are also emerging with Panama’s 90-day tourist visa being shortened to 30 days for security purposes, with an allowable extension of 60 more days. The changes have made it harder for foreign visitors to make extended property tours and go through the closing process in one visit. Legislators are considering reversals or modification of this new law due to its feared consequences to the second home market, but there's a definite chill in the immigration climate.

As with much of Latin America, Panama struggles with getting corruption under control, cementing the rule of law, and generating enough educational reform and economic growth to reduce its stubbornly high poverty rate. Combined with the financial burden of expanding the Panama Canal -- and the uncertainty over how much additional revenue it will generate – foreigners here are faced with the growing possibility of reduced tax incentives and higher taxes going forward.

However, the current market conditions aside, the following does give Panama that ‘edge’ above it’s Central American competitors:

- Panama City records rental yields of up to11.23% !!

- Individual Taxes are moderate with a maximum of 27% per person.

- Transactions Costs are low with all costs included equalling approximately 7% (This includes the estate agents fee :)

- Purchasing property that began construction before July 2009 will be exempt from paying property taxes for 20 years

Conclusion

So, take into consideration the amount of investment going into Panama, the current economic growth, the upgrading of the canal as well as the spectacular investment opportunities that are currently available………And what do you get?

A country that has all the attributes to be the ‘New Dubai’ or the ‘New Miami’………..as long as the big brother up North doesn’t ruin the party.