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Rising interest rates slowing property market in S/Africa
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A typical house on the S/African property market
The property market, like any other, is not without its own twists often occasioned by price mechanism or market forces, that is, the interplay of demand and supply, and policy twists by government.
In the out-gone year 2007, the story of the property market was a case of different strokes for different folks.
While estate developers in Nigeria were smiling to the banks following the boom in the market, in South Africa within the same period, it was a difficult decision for prospective homeowners whether to rent or buy houses.
Also, whilst US and UK property markets are currently sweating it out and in fact experiencing increasing negative growth rates, global property investors find themselves in a precarious position where it almost becomes a case of “stockpicking in a falling market”.
In Nigeria, the new year is very optimistic for private developers even as house buyers continue to groan under the pain of rising house prices. For those in South Africa, it is a different story. For them, 2008 has certainly started with a bang and is earmarked by rising interest rates, the settling in of the New Credit Act (with lots more legislation on its way), and a general slowing down of house prices causing a general feeling of the property market losing its lustre.
According to a statement made available to Business Day by Century 21, a world renowned real estate firm, still relatively new in South Africa, the situation in the country has been made worse by Eskom, the country’s electricity supplier, that appears to be punishing its citizens countrywide on a daily basis with so called “load-shedding” to make up for the failings of the past 10 years.
As if all these internal rumblings weren’t enough, financial instability and market volatility of foreign markets add to this country’s woes. Words like “meltdown” and “depression” are being thrown around with gay abandon.
Century 21 noted that consumer spending has slowed as a direct result of interest rate hikes. This is having a substantial impact on the retail sector and in motor car sales; households are clearly under pressure and are gradually tightening their belts.
Sectors that suffer the consequences of this and in fact, bear the brunt of this tight spending are the residential property market and the durable consumer segment. However over the next couple of years infrastructure spending is still expected to be the leading growth contributor as 2010 projects materialise.
It is however, not all doom and gloom for this country because, notwithstanding all the above, economists are confident that South Africa will still experience a positive growth rate, and that this will keep employment and income gains in positive territory. All in all, on the economic front, it would seem that even though there are tough times ahead, pneumonia certainly isn’t the expected diagnosis.
As one of the leading real estate firms in the country and a new comer, Century 21 says what they are experiencing in South Africa, and more precisely Port Elizabeth, is not unexpected. “In fact, upward trends were never meant to go on forever, and retracements are a very necessary ‘evil.” On a macro scale, we are most certainly in one of the strongest uptrends ever, and it is common knowledge that whilst in the doldrums of a retracement, professional property practitioners and seasoned investors are picking up properties at a song whilst the hangers on start dumping. Effectively, the opportunities in property are on an increase.
While estate developers in Nigeria were smiling to the banks following the boom in the market, in South Africa within the same period, it was a difficult decision for prospective homeowners whether to rent or buy houses.
Also, whilst US and UK property markets are currently sweating it out and in fact experiencing increasing negative growth rates, global property investors find themselves in a precarious position where it almost becomes a case of “stockpicking in a falling market”.
In Nigeria, the new year is very optimistic for private developers even as house buyers continue to groan under the pain of rising house prices. For those in South Africa, it is a different story. For them, 2008 has certainly started with a bang and is earmarked by rising interest rates, the settling in of the New Credit Act (with lots more legislation on its way), and a general slowing down of house prices causing a general feeling of the property market losing its lustre.
According to a statement made available to Business Day by Century 21, a world renowned real estate firm, still relatively new in South Africa, the situation in the country has been made worse by Eskom, the country’s electricity supplier, that appears to be punishing its citizens countrywide on a daily basis with so called “load-shedding” to make up for the failings of the past 10 years.
As if all these internal rumblings weren’t enough, financial instability and market volatility of foreign markets add to this country’s woes. Words like “meltdown” and “depression” are being thrown around with gay abandon.
Century 21 noted that consumer spending has slowed as a direct result of interest rate hikes. This is having a substantial impact on the retail sector and in motor car sales; households are clearly under pressure and are gradually tightening their belts.
Sectors that suffer the consequences of this and in fact, bear the brunt of this tight spending are the residential property market and the durable consumer segment. However over the next couple of years infrastructure spending is still expected to be the leading growth contributor as 2010 projects materialise.
It is however, not all doom and gloom for this country because, notwithstanding all the above, economists are confident that South Africa will still experience a positive growth rate, and that this will keep employment and income gains in positive territory. All in all, on the economic front, it would seem that even though there are tough times ahead, pneumonia certainly isn’t the expected diagnosis.
As one of the leading real estate firms in the country and a new comer, Century 21 says what they are experiencing in South Africa, and more precisely Port Elizabeth, is not unexpected. “In fact, upward trends were never meant to go on forever, and retracements are a very necessary ‘evil.” On a macro scale, we are most certainly in one of the strongest uptrends ever, and it is common knowledge that whilst in the doldrums of a retracement, professional property practitioners and seasoned investors are picking up properties at a song whilst the hangers on start dumping. Effectively, the opportunities in property are on an increase.
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