Most clients are discouraged to buy property at the prevailing interest rate now at 11.75%. We are well informed that the interest rate may drop later on in 2024, however, it is still a good time to invest in property as it is the buyer`s market. Did you know that the interest rate went up as far as 26% in 2009?. Thus therefore it is still prudent to buy now. Contact us for expert advice.
Inflation declines further
From a property market perspective, there was more good news in the shape
of a further decline in the Consumer Price Index (CPI) and a further sharp
drop in the Producer Price Index (PPI), a leading indicator of consumer
inflation.
Given the current state of the economy, it is imperative to start fostering
higher growth now via a lowering of interest rates. Hopefully, this month’s
meeting of the Monetary Policy Committee will mark the beginning of a
more accommodating policy stance, something indebted households, in
general, and the residential property market, in particular, need desperately.
Positive GDP growth in Q2
Higher economic growth is on the cards with the continued rise in formal
sector employment during Q2 2023.
Statistics SA reports that the economy expanded by 5.2% in nominal terms
between April and June compared to Q1 2023.
Adjusting this figure by the average producer and consumer inflation yields
an impressive real GDP growth rate of 4.7%.
Key growth drivers that have come to the fore during Q2 2023 are:
• Record harvests of essential agricultural products, which also feed into
food processing industries
• Growth in exports of manufactured goods
• All-time record imports of machinery and equipment
The increased imports of machinery and equipment are associated with the
exponential growth in renewable energy installations, with rooftop solar
photovoltaic (PV) capacity in South Africa having quadrupled in the past year
from just over 1,000MW to 4,400MW.
AUGUST 2023 PROPERTY BAROMETER
The FNB House Price Index growth slowed to 1.1% y/y in July, down from 1.6% in June (revised from 1.7%). This is in line with the continued decline in buying activity, with mortgage volumes now tracking closer to pre-pandemic levels. The average bond amount, estimated from deeds data, declined by approximately 3% in 2Q23, the first decline in 14 years (since 2Q09). Similarly, year-to-date tax data reveals that property transfer duties are down by 10.3% compared to the same period last year. In addition to lower demand, these indicators signify a downscaling trend by buyers, along with tightening of lending standards amid higher borrowing costs and affordability constraints.