Six reasons to be cheerful about 2009
CEO of black-empowered estate agency group sees many economic positives, but chastises South African politicians for "playing the man, not the ball".
In the next of Realestateweb's end-of-year series on what estate agency bosses expect for their businesses and the property market in the year ahead, Leapfrog Property Group CEO Jan le Roux sees more positives than negatives.
It is time for South Africa's political leaders to stop looking after themselves and rather care for the country, taking it forward to realise its potential, particularly now that some economic indicators show that the worst of the economic slump South Africa has experienced may be behind us and that the country is set for renewed growth by 2010.
Here are some positive economic developments:
* WesBank sales and marketing director Chris Kock reported that the bank's vehicle sales' confidence indicator "surprisingly showed that on a 10-point scale, dealers expect activity to increase to 5,7 in three months, 6,2 in six months and 7,1 in 12 months".
* Finance Minister Trevor Manuel reported in his recent mid-term Budget speech that although growth is slowing to 3,7% for the current year and 3% for next year, it should again increase to 4,3% by 2010. Manuel is also going to spend more than R600bn on infrastructure.
* On top of that, 2010 is looming large, which should also encourage a general feeling of confidence.
* Certainly, the best news is the fact the CPIX inflation has slowed to 13% from 13,2%. Trends are often more important than individual facts, and if this trend continues, the proverbial sun will start shining again.
* Goldman Sachs Economist Ashok Bhundla predicts that this may well prompt the MPC to introduce a first rate cut of 50 basis points (half-a-percent) at its February meeting. Although Bhundla doesn't necessarily agree that it will happen in February, he argues that "it certainly can now happen sooner rather than later".
* FNB Chief Economist Cees Bruggemans makes the point that the economy might be weaker than we thought, which confirms my view that we should not expect miracles for next year. However, it is still a good market for investors and normal buying and selling should still take place, irrespective of the state of the market
The good news is the prediction made by Bruggemans that interest rates, in line with global trends, could and should be cut now - a sentiment with which I wholeheartedly concur.
I do not, however, see fireworks for the immediate future. But having reached the bottom of the barrel, we can only start climbing up slowly but surely.
In the current pedestrian residential property market, we advise buyers and sellers to bear in mind that the property market has almost invariably been a good investment for the average homeowner, provided a medium- to long-term view is taken.
Even in fantastic markets you can lose money if you buy and sell, for example, in less than a year. Even in the worst of markets, if you take a 3-5-10-year view, you would have made a sound investment in buying property.
As far as most property transactions are concerned, the up or down/high or low of the market is of very little consequence.
People still get married and divorced, have kids, kids leave home, get promotion, move between cities, etc in all markets. Sellers who sell in high markets have to buy in high markets. Sellers who wait until the low market improves, may sell at a higher market but will buy at a higher market, whereas if they sell in a low market they buy in a low market.
Besides various global factors impacting financial markets, fact is that markets are also extremely sensitive to political situations, and South Africa is certainly no different. Therefore, it would really help if politicians stop playing the man, and rather keep their eyes focused on the ball.
This outlook is based on domestic and international rates and indices as they currently exist. However, should the meltdown in the markets continue and commodity prices keep dropping, the major world economies would be plunged into a deeper and prolonged recession and we would probably see a marked drop in property prices.
This would be as a result of lower demand for SA exports, reduced capital inflows, a weaker Rand and high interest rates, leading to serious sellers dropping their asking prices significantly to meet buyers' affordability.
Article by: Jan le Roux - www.realestateweb.co.za