Green list, repo rate bodes well for letting
MAIN IMAGE: Grant Smee, CEO of Frankie Bells Real Estate; Kyle Rigney, bond advisor of bond originator Bondspark
The news of South Africa being removed off the red list could spell a tourism influx over the festive season – particularly from UK residents.
Google reported a notably visible spike in flight searches to South Africa following the status change and the removal of the mandatory, costly hotel 10-day quarantine.
At the same time the Monetary Policy Committee’s (MPC’s) September decision to keep the repo rate unchanged gives cash-strapped consumers some breathing room as inflation inches upwards – and is welcome news in SA’s residential property market.
Grant Smee, CEO of Frankie Bells Real Estate and property entrepreneur says that this could have a positive effect on the embattled short-term rental market which has struggled to make ends meet since the onset of the Covid-19 pandemic.
“Airbnb’s and other short-term rentals have seen a significant decrease in demand over the past 18-months and the sector sees the reopening of leisure travel as a much-needed lifeline.”
Coastal areas such as George, Knysna, Mossel Bay, Ballito and the Atlantic Seaboard are expected to “score big”.
“At this stage, flights out of the UK are still limited and expensive but we are seeing a demand for large coastal homes to accommodate families over the festive season,” he adds. “We also can’t rule out Mpumalanga as a sought-after tourist destination with easy access to the Kruger Park and other private reserves.”
Important to remember is the exchange rate and the price that many are willing to pay to see their loved ones after almost two years. “Rather than opting for a short trip, many visitors have their sights set on rentals of around one month in coastal areas. These rental properties are three-bedrooms-plus to accommodate large family reunions.”
Kyle Rigney, bond advisor of bond originator Bondspark says, “While the residential market has been buoyant since the interest rate first dropped to its current record low in 2019, the sustained low will keep home ownership on the radar for South Africans who wouldn’t otherwise be able to buy property. It also means that consumers who have bought properties in the past 18 months will continue to be able to afford their bond repayments.”
The fact that the repo rate remains unchanged and the interest rates are so low, could open doors for foreign visitors to South Africa in the coming months. Although a slight increase in interest rates are expected early in 2022, foreigners visiting the country could still have the benefit of these prime lending times.
“We were expecting the prime rate to be adjusted upwards because we had noticed a decrease in the interest rates being granted on new bonds. There had been lots of chatter around a possible increase and the ramifications it would have on affordability. The prime rate staying at 7% is definitely a step in the right direction for the economy and the country as a whole,” says Kyle Rigney, bond advisor of bond originator Bondspark.
And while local lockdowns over the festive season can’t be ruled out, Smee believes that the hospitality and tourism sector will be accommodated over this period. “The sector has faced fatal blows since the onset of the pandemic and the reopening of borders for leisure travel to South Africa is vital.”
Adding to this, Smee anticipates a demand for coastal home purchases by international investors. “Home prices are at an all-time low and investors visiting the country will be looking around for great deals on a holiday home or home to rent out.”
Australia, home to many South African expats, will also be opening international borders for residents to travel from next month. Smee says that this too could generate great demand for residential property.
“Working with an agent gives you access to data. Knowing what other properties are renting for is the best way to ensure that you remain competitive and can secure a tenant. Over or under pricing could spell disaster over this period. The same goes for purchasing property.”
“Make sure that your estate agent has access to a large database and can run a marketing campaign to expose your property to a host of international tourists” Smee concludes.