Clarke predicts drop in interest rates soon
The Rawson Property Group's sales in September were the best they have achieved in the last eleven months. This, says Tony Clarke, the MD, indicates that the South African residential property market is at last on a path to recovery.
After last week's welcome South African Reserve Bank decision to leave the interest rates as they are, Clarke predicts that the first long-awaited drop in the rates could take place as early as this coming December.
Citing the factors mentioned by many economists recently - a drop in inflation and especially the oil price and the need to stimulate the economy - Clarke says he can now see no reason to keep the interest rates at their current levels. He expects the rate, in fact, to hit 13% by mid-2009 and he is confident that demand for houses will pick up month-by-month from now on.
Right now, he adds, the market remains tough. Quoting the FNB Property Update, he says that nowadays 88% of properties are sold below their asking price (in 2007 the figure was 73%) and on average it takes five months to sell a home - as compared to two and a half months in 2007.
Shrewd investors with resources, he adds, are cashing in on the bargains now available: 13% of buyers are now buying to rent out the property.
South African property in 2009 is, says Clarke, in for a "ride of a lifetime".
"Those of us in the Rawson Property Group are now being asked a lot of questions about how the global economic crisis will affect South African property.
"As many spokesmen have recently explained, the South African economy has felt the impact of this very serious meltdown less than most other countries and the reasons for this are that we have been protected by our conservative currency exchange rulings (previously often criticised as archaic) and the National Credit Act, which, although it arrived late, did prevent the average South African becoming seriously over-borrowed.
"Equally important perhaps is the perception now in the international market that following the bail-out by the US Federal Bank of Fanny Mae and Freddy Mac no further major rescues will be necessary. If this turns out to be true - and we can only hold our thumbs and hope that it does the international economic scenario could now be on a very slow recovery path, which, again, will benefit South Africa."
Particularly beneficial to the Rawson Property Group, says Clarke, has been the new company Rawson Finance, which has been in operation since 1st May to help clients access bond mortgage credit.
This company, says Clarke, has been achieving a 40% increase in sales per month at a time when other bond originators have been laying off staff in large numbers. The reason for this, he believes, is that the team work between the agent and the Rawson Finance people has resulted in their presenting the bond applications in more creative and innovative ways than was hitherto the general practice.
"Believe me," says Clarke, "the fact that the agent will lose the sale if the bond application is not approved has proved a major motivating force and, building on their many years of previous experience, the Rawson team has in a very short time learned to present Mortgage Bond applications in a way that makes it far easier for the banks to accept them."
Vivienne Ferguson of Rawson Finance commented that the deposits now being received are very often larger than previously - often 40% to 50% of the sales price. This, she said, indicates that there is a trend towards scaling down and towards accepting the stricter credit restrictions of the National Credit Act. This augurs very well for the future of the South African housing sector because it shows that South Africans are at last coming to terms with market realities, said Ferguson.
Article by: www.rawson.co.za