Slow recovery in property market expected post elections
MAIN IMAGE: From left to right, Samuel Seeff, chairman of the Seeff Property Group, Dr Andrew Golding, chief executive of the Pam Golding Property Group, Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, Herschel Jawitz, CEO of Jawitz Properties and Tony Clark, managing director of Rawson Property Group.
With the elections over and the Reserve Bank’s expected decision to keep the repo rate the same – property experts warn a long road still lies ahead.
The announcement last Thursday by the governor of the Reserve Bank, Lesetja Kganyago, that the repo rate will remain unchanged means the prime lending rate will stay at 10.25%. Kganyago also lowered South Africa’s expected economic growth rate from 1.3% in March to 1% (it was 1.7% in January).
“The near-term growth outlook is limited by the larger than expected slowdown in the first quarter, weak business and consumer confidence as well as growing pressure on household disposable income,” Kganyago said.
Although it was expected that the repo rate would stay the same, leaders in the estate agency industry say they had hoped for a cut as that would have been a welcome catalyst to stimulate activity in the sluggish property market.
Chairman of the Seeff Property Group, Samuel Seeff says that the Reserve Bank should have been brave and should have cut the interest rate to kickstart the economy.
Seeff says that following the conclusion of what is largely seen as a successful election, not much has changed. “There has been no real positive impact on the economy or property market, and we appear to be at an economic impasse. Good news and a positive injection are needed to get the economy and property market back on track,” he says.
“It has been one of the most challenging years for property with a great deal of buyer apathy and too much fence sitting, based perhaps more on conjecture than reality,” he continues.
It remains a buyer’s market. The continued weak economic climate and low demand has led to a considerable rise in stock levels while price growth has flattened to around 4% at best – and Seeff expects that the market will continue to trade flat for the rest of the year. “Across most areas, it is an excellent time to find a good deal in the market, but it seems that buyers are not taking the opportunities,” he says.
On a more positive note, increased competition among the banks for the limited pool of mortgage loan applications means it should be a little easier for buyers to obtain mortgage loans.
“A reduction in the repo rate, on the back of the market-friendly election outcome, would have created stimulus for the economy and property market, as well as a confidence boost for consumers in general, especially home-owners and buyers with outstanding mortgages and hefty bond repayments,” says Dr Andrew Golding, chief executive of the Pam Golding Property group.
However, he says based on their statistics for April there appears to be “promising signs which augur well for an uptick in activity now that the dust has settled on the election”.
“We believe the stabilisation and potential for a turnaround in the national market is being driven by a combination of a gradual strengthening in Gauteng and a tentative rebound in the Western Cape region, which had experienced a price correction. Despite this, the Western Cape remains the top performing major region overall, with the strongest regional price growth (6.75%) across all price bands. Interestingly, the East Rand continues to enjoy a modest rebound and is currently the top performing Gauteng market,” he says.
Golding notes further that after each of the five general elections held since 1994, the SA housing market experienced a rebound of varying degrees during the subsequent 12 months. Furthermore, he says more first-time home buyers are buying homes, also once more in Cape Town, following the recent price adjustments – and this trend is also evident in KZN.
The regional director and CEO of RE/MAX of Southern Africa, Adrian Goslett says the fact that the MPC almost allowed for an interest rate cut at this meeting is a promising sign that this might happen soon. “If inflation rates continue to be within the MPC’s target point, homeowners can expect an interest rate cut at the next meeting. However, should negative risks push inflation beyond this mid-point of the target range of between 3% and 6%, the MPC has warned that interest rates will increase to moderate inflation. Homeowners are therefore advised to enjoy these next few months of stable interest rates while paying close attention to inflation rate announcements to prepare themselves ahead of the next interest rate announcement scheduled to be made on 18 July,” Goslett advises.
Tony Clarke, managing director of the Rawson Property Group, said the news of the unchanged repo rate is definitely going to push up consumer confidence levels, but he would recommend for consumers to rather use this time to buy low and pay off as much debt as possible which will put them in a stronger position for the future. “There is still a long hard road ahead for the average consumer, despite the possibility of more affordable properties on the horizon,” said Clarke.
Herschel Jawitz, CEO of Jawitz Properties, says there is very little business and consumer confidence and the Reserve Bank is clearly not yet confident enough to drop interest rates in the face of a dismal economy and inflation that sits comfortably in the mid-range of the Reserve Bank’s target. “Factors such as Eskom, a vulnerable exchange rate and ratings agency caution show we are still paying a high price for the mismanagement of the country by the government over the past nine years,” adds Jawitz.
“There was very little expectation of a rate cut by consumers so the decision will have no impact on the residential market in terms of buyer demand. Current buyer demand has less to do with the pressures on disposable income than it does with consumer confidence,” he continues. The key for recovery of the residential market lies in improvement in consumer confidence and towards this president Cyril Ramaphosa’s cabinet announcement will be a key marker for the country.