From the Desk of the MD - June 2019
Category From the Desk of the MD
It is of course wonderful to see how confidence in SA and the economy has revived in the past few weeks since the election - and how this has boosted interest in the real estate market.
The FNB-BER consumer confidence index is up from 2 in the first quarter of the year to 5 currently, buoyed by the election outcome that both local and foreign investors believe will see the government under President Ramaphosa continue to clean up corruption and mismanagement in the public sector and further develop its employment creation initiatives.
The appointment of a smaller and largely popular Cabinet has also strengthened the average South African's belief that the country is back on the road to a better future.
Further positives for potential home buyers include the Reserve Bank's recent decision to keep interest rates stable for at least the next couple of months and, if international oil prices continue to fall, the possibility of a rate cut in July to stimulate economic growth. In addition, the banks are still competing vigorously for new home loan customers and thus offering very advantageous interest rates and terms to borrowers with good credit records, low debt loads and stable incomes.
This has led, the statistics show, to the dam of pent-up demand breaking and a rush of new purchases and home loan applications in the past few weeks, and Absa is predicting that the value of outstanding household mortgages, which currently totals R968-billion, will increase by 4,5% this year.
However, the best news of all is that home prices are still only increasing very slowly, which means that those who are keen to buy now can currently find very good value for their money. In fact, there could hardly be a better time to get into the market for the first time, or to upgrade if you are an existing homeowner. The economy is set for growth, home loans are readily available at favourable rates and home sellers are generally very negotiable as they are aware that there are plenty of homes on sale for buyers to choose from.
This scenario won't last forever though. The number of plans for the construction of new homes over the next two years is way down, and as stock is absorbed by astute buyers, there will be upward pressure on prices, buyers will need bigger home loans and it will become harder to qualify. Thus our advice to anyone still on the fence at this moment is to jump off and into the market as soon as possible. The biggest rewards always go to the frontrunners.
Author: Gerhard Kotze
