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Cape Town Property News |
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Cape Waterfront Estates November 2009 Newsletter
As we move into the busy summer months, we are seeing an increase of activity in Property Sales in Hout Bay, Llandudno and Camps Bay, as well as an increase in the prices for which properties are being sold...
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Current Market Trends
When it comes to the property market outlook in the current economic climate, economists have differing but generally positive views. For example, John Loos, the Property Strategist in FNB’s home loans department, forecast an improvement in sentiment, saying that now is “probably as good as it gets” in terms of the best time to buy property before prices start to recover.
In an article published by “Realestateweb”, a top economist has predicted that interest rates will begin to fall fast in the second half of 2008, and inflation is set to drop more than it has risen and is expected to be back in the South African Reserve Bank’s target range of 3-6% by the time the 2010 World Cup kicks off. This means that some purchase power will be put back into the pockets of already struggling consumers. Investment strategist for Investec Securities, Brian Kantor, has also predicted that the worst could certainly be over for interest rates. Reserve Bank Governor Tito Mboweni has been using interest rates as the primary tool to manoeuvre towards his target of 3-6%.
Economist Bruggemans has forecast that the first interest rate cut might come in December, which means a prime interest rate of 15% by the end of the year and a prime interest rate of 13% by the end of 2009. However, he went on to emphasise that his view is dependent on a number of variables, which include the oil price not producing another shock. Since June, the oil prices and agricultural prices have dropped due to the stability of the Rand. Lower than expected economic growth, with a sacrifice in large parts of the economy already being advanced, is also a factor.
Dries du Toit, of Dries du Toit Consult CC believes that the bond yields “act like a barometer” and indications are that they have been falling over the past five weeks. “People price listed property on the back of bonds. Since November [listed property] fell by 35% up to the first week in July. Already it has turned around and increased by 15%,” du Toit said at the Rode conference. He went on to say that, “If we are successful in getting interest rates down, the future will exceed all our expectations. I’m not talking about house prices, but commercial, direct and listed property”.
According to the RPPR Sales Reports for July & August 2008, the trends are as follows:
SALES | JULY
2008 | AVERAGE
PRICE | % | AUGUST
2008 | AVERAGE
PRICE | % | | | | | | | | | | HOUT BAY | | | | | | | | | | | | | | | Houses Sold | 9 | R2,154.000 | 15.4% | 8 | R2,410.750 | 17.2% | Sectional Title | 3 | R 920.000 | 23.2% | 2 | R1,425.000 | 13.4% | Vacant Land | 3 | R2,048.333 | 15.1% | 2 | R2,575.000 | 6.4% | | | | | | | | | | LLANDUDNO | | | | | | | | | | | | | | | | Houses sold | | | | 2 | R12,350.000 | 13.9% | | |
Comparison
Houses Sold – percentage differential between July and August = 1.80%
Sectional Title – percentage differential between July and August = 9.80%
Vacant Land – percentage differential between July and August = 8.70%
According to Kevin Lings, an economist at Stanlib, there has been a slowdown in real income growth because wage growth has not fully kept pace with inflation. With less access to cash and credit, the trend has been for consumers to economise on durables, particularly new cars, appliances and medical equipment. With regard to fixed assets like property, figures show that more houses are being sold at auction by cash-strapped owners who are auctioning off their homes in an attempt to settle their debts, or in an attempt to ward-off repossession by their banks, with some auction houses even promoting the scheme as a "recovery" solution for over-indebted people. This is decidedly not the answer, as these people could still find themselves facing severe financial problems if their homes go under the hammer for less their market values.
Owners who are concerned about losing their homes they should not be panicked into taking drastic measures by auctioning off their property. As buyers at auctions are on the lookout for cheap deals, a property is likely to sell at auction for less than the market value and thus sellers might not even be able to recoup enough money to pay off all their debts, anyway! Home owners should rather be doing everything in their power to hold onto their fixed assets and instead take stock of all their expenses and see where else they could be saving money. Failing that, South Africans should apply for debt review whereby they can restructure their finances in a way that could enable them to maintain their family home. Once under debt review, over-indebted consumers can work hand-in-hand with a financial adviser to formulate a repayment plan. Those with severe debt problems should always seek independent financial advice before they take such drastic action as auctioning off their homes and should talk to their mortgage lender as soon as they have problems meeting their home loan repayments.
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