From the Desk of the MD - November 2018
Category From the Desk of the MD
There has recently been so much positive news for real estate that it is hard not to be optimistic about the prospects for home sales and prices as we start looking ahead to 2019.
South Africa obviously has big economic problems, as we were reminded by Finance Minister Tito Mboweni during the Mid-Term Budget speech. GDP is currently only growing at about 0,7% a year and we currently have about 6,2m people who should be employed but are not. The rand/ dollar exchange rate has been above R14 for most of the past year, which puts upward pressure on inflation and raises the likelihood of the Reserve Bank raising interest rates. And national debt is expected to equal more than 50% of GDP until at least 2023.
Nevertheless, things look much brighter for the real estate industry than at this time last year, for a number of reasons. First among these is the signed agreement reached by business, labour and community leaders at the Jobs Summit held in early October to commit billions of rands to creating at least 275 000 jobs a year for the next five years - because that has the potential to add more than 1m brand new homeowners to our market.
Secondly, there was the announcement in the Mid-term Budget speech that R1bn more is being allocated to those government housing subsidies that enable people in the "gap" market (households earning between R3500 and R15 000 a month) to obtain bonds and buy their own homes. This is expected to add at least 12 000 first-time buyers to our market.
Thirdly, the investment summit held just a few days ago resulted in pledges from local big business for R290bn worth of investment into the economy over the next five years to add to the R400bn worth of international commitments already secured by President Ramaphosa's investment envoys this year. These investments are set to give rise to thousands of new training, employment and business opportunities in the mining, automotive, agri-business, sustainable energy, communications and tourism sectors - and to higher demand for both rental and owned homes.
And finally, the strong measures being taken by President Ramaphosa and his government to clean up the massive corruption and waste that has plagued the economy are also positive, in the sense that they will encourage even more confidence, investment and job creation. These measures include firing the controversial of SARS, putting SAA on notice to prepare for an equity partner, refusing to allocate additional budget to the public sector wage bill, and putting several dysfunctional municipalities under administration.
In short, I think we are well on our way to the New Dawn we were promised in this year's State of the Nation address, and that we can look forward to a much healthier real estate market going forward.
Author: RealNet
