The information in this article is courtesy of iAfrica (The party’s over – 28 July 2009)
The Bureau for Economic Research (BER) announced this week that consumers should not expect any interest rate reductions in the foreseeable future.
The bureau's economist Hugo Pienaar said in a statement on economic prospects for the third quarter of 2009, that this was in light of recent double-digit wage settlements in a number of sectors and indications that the worst of the domestic recession might have passed.
Last month South Africa saw Reserve Bank's monetary policy committee deciding to keep the interest rate unchanged at 7,5% after reducing the repo rate by a cumulative 450-basis-points between December 2008 and May 2009.
According to Pienaar the June rate decision can be interpreted as a pause in the rate cycle in order to give the MPC an opportunity to gauge the impact of the rate, which generally takes a while to take effect.
He added that the decision also indicates that we have reached the end of the monetary easing cycle, meaning no further rate cuts should be expected.
Prospect for consumer spending remains a concern mainly due to the potential for further sharp job losses. This means that the Reserve Bank could cut the repo rate further later in 2009 should household outlays continue to deteriorate and inflation slows faster than expected.
“In line with the South African Reserve Bank's latest inflation projection, the bureau's forecast suggested CPI would remain above six percent through February 2010, with a sustained fall below six percent only forecast from the second quarter of 2010,” said Pienaar
He added that petrol prices could decline by more that 20c per litre in the beginning of August due to the strength of the rand exchange rate and a recent drop in the oil price.
All and all South Africans can expect a positive gross domestic product growth from the third quarter, but the economy was forecast to contract by 2% during 2009 bringing the projected growth for 2010 to about 2,7%.
Friday, July 31, 2009
Monday, July 20, 2009
Mboweni’s Successor Announced
The information in this article is courtesy of iAfrica ( Mboweni steps down - 20 July 2009)
The current Chair of Absa Bank, Gill Marcus will be Reserve Bank Governor Tito Mboweni’s successor. This was announced by president Jacob Zuma at the Union Buildings on Sunday, 19 July 2009 after Mboweni indicated that he wanted to step down to pursue his own personal interests.
After being introduced to the media, Marcus refused to be bated on her views about the bank’s current inflation targeting policies, saying that it is far to early to comment.
Marcus has been seen as someone with good economic experience from both private and public sectors. This indicates that the market will likely welcome her appointment.
Mboweni said in his speech that he enjoyed an excellent working relationship with the presidency, the national treasurer and the minister of finance during his time as governor. He also congratulated Marcus on her appointment.
The SA Communist Party also congratulated Gill saying that her appointment is a “breath of fresh air”.
Economist Mike Schussler said that Marcus is a person with sound judgment, adding that her knowledge of the institution would ensure continuity. According to him there should be change in policy from her.
The current Chair of Absa Bank, Gill Marcus will be Reserve Bank Governor Tito Mboweni’s successor. This was announced by president Jacob Zuma at the Union Buildings on Sunday, 19 July 2009 after Mboweni indicated that he wanted to step down to pursue his own personal interests.
After being introduced to the media, Marcus refused to be bated on her views about the bank’s current inflation targeting policies, saying that it is far to early to comment.
Marcus has been seen as someone with good economic experience from both private and public sectors. This indicates that the market will likely welcome her appointment.
Mboweni said in his speech that he enjoyed an excellent working relationship with the presidency, the national treasurer and the minister of finance during his time as governor. He also congratulated Marcus on her appointment.
The SA Communist Party also congratulated Gill saying that her appointment is a “breath of fresh air”.
Economist Mike Schussler said that Marcus is a person with sound judgment, adding that her knowledge of the institution would ensure continuity. According to him there should be change in policy from her.
Thursday, July 16, 2009
Demand Still a Problem – FNB Barometer
The information in this article is courtesy of Realestateweb (Property market sentiment worsens – 15 July 2009)
The latest FNB Residential Property Barometer shows that demand for residential property is still very low causing an oversupply of stock on the market. Estate Agents who took part in the survey believe that the banks’ strict lending criteria and high deposits on home loans are to be blame for the low levels of demand.
Other finding by the survey include that more than 30% of seller would like to offload properties in order to downgrade because of financial pressure. Also, low-income earners are apparently struggling the most, with more that 41% of seller indicating to agents that financial woes are their reason for selling.
Estate agents canvassed in the survey also suggested that about a third of investment properties returned to the market have been sold for less that the previous purchase price. The average time a property spends on the market prior to the sale increased to 21 weeks and one day, according to the survey.
With 86% of sellers required to drop their asking prices in order to make sale, estate agents still feel that seller are being unrealistic about their property values.
A more positive finding of the survey is that only 8% of sellers are mentioning emigration as a reason for selling. This is significantly down from 20% in the 3rd quarter of 2008.
Another finding is that fewer foreigners are buying property in South Africa although FNB reported to see a slight hint in the figures that expat buying has risen.
Although FNB said that they are starting to experience improvement in arrears situation, there is only a mild improvement in the demand situation, with the supply figures reflecting widespread financial pressure.
The latest FNB Residential Property Barometer shows that demand for residential property is still very low causing an oversupply of stock on the market. Estate Agents who took part in the survey believe that the banks’ strict lending criteria and high deposits on home loans are to be blame for the low levels of demand.
Other finding by the survey include that more than 30% of seller would like to offload properties in order to downgrade because of financial pressure. Also, low-income earners are apparently struggling the most, with more that 41% of seller indicating to agents that financial woes are their reason for selling.
Estate agents canvassed in the survey also suggested that about a third of investment properties returned to the market have been sold for less that the previous purchase price. The average time a property spends on the market prior to the sale increased to 21 weeks and one day, according to the survey.
With 86% of sellers required to drop their asking prices in order to make sale, estate agents still feel that seller are being unrealistic about their property values.
A more positive finding of the survey is that only 8% of sellers are mentioning emigration as a reason for selling. This is significantly down from 20% in the 3rd quarter of 2008.
Another finding is that fewer foreigners are buying property in South Africa although FNB reported to see a slight hint in the figures that expat buying has risen.
Although FNB said that they are starting to experience improvement in arrears situation, there is only a mild improvement in the demand situation, with the supply figures reflecting widespread financial pressure.
Friday, July 10, 2009
Bond Choice: Go Out and Buy
The information in this article is courtesy of BusinessReport (Bond Choice urges consumers to go out and buy – 10 July 2009)
Although South Africa has not been affected as badly as Europe and the USA, it has led to a significant lowering in house price. According to Bond Choice, a mortgage origination company, this has bought new home ownership within reach of a new band of potential first time investors.
Managing Director, Kevin Mountjoy, explained that average home loans application has dropped between R550 000 and R600 000 with the top-end of the segment the most affected in terms of volumes,
He added that the current market made it possible for buyers to secure homes with the price they wish to - also known as the emotional price - due to the fact that the market is falling to levels last experienced in 1996, at rates not experienced since the 1980’s.
"Consequently, for genuine home owner seekers i.e. those who have secured professional advice on affordability and procured their 20 percent deposit plus the capital required for administration, the time for purchasing property has never been more advantageous," he said.
Mountjoy expressed that although South Africa had seen house prices drop with 20% to 25%, it is still not as bad as other parts of the world where price dropped with 50%. He added that South Africa had come of the longest sustained growth period in the last 35 years and he believes the industry should both acknowledge and rejoice the fact.
He predicts a recovery among middle-income housing, as buyers are showing some confidence in the market and seller are accepting the reality of a decline in prices.
Although South Africa has not been affected as badly as Europe and the USA, it has led to a significant lowering in house price. According to Bond Choice, a mortgage origination company, this has bought new home ownership within reach of a new band of potential first time investors.
Managing Director, Kevin Mountjoy, explained that average home loans application has dropped between R550 000 and R600 000 with the top-end of the segment the most affected in terms of volumes,
He added that the current market made it possible for buyers to secure homes with the price they wish to - also known as the emotional price - due to the fact that the market is falling to levels last experienced in 1996, at rates not experienced since the 1980’s.
"Consequently, for genuine home owner seekers i.e. those who have secured professional advice on affordability and procured their 20 percent deposit plus the capital required for administration, the time for purchasing property has never been more advantageous," he said.
Mountjoy expressed that although South Africa had seen house prices drop with 20% to 25%, it is still not as bad as other parts of the world where price dropped with 50%. He added that South Africa had come of the longest sustained growth period in the last 35 years and he believes the industry should both acknowledge and rejoice the fact.
He predicts a recovery among middle-income housing, as buyers are showing some confidence in the market and seller are accepting the reality of a decline in prices.
Monday, July 6, 2009
June House Price Index - Slide Continues
The information in this article is courtesy of iAfrica (Property slide speeds up – 6 July 2009)
John Loos, FNB’s property strategist said that the June house prices index show no sign of improvement and the 450 basis point shaved off the interest rate has had a marginal impact on property demand to date.
The rate of deflation for June came in at -10.2 percent year-on-year, compared with a revised -8.5 percent rate for May. On a month-on-month basis, the rate of deflation was -2.2 percent for June.
Although FNB has announced a mild relaxation on their credit policy is seems like banks have remained cautious. The debt-to-disposable income ratio also remained high and can probably be attributed to disposable income being under severe pressure due to the recession.
The pressured household sector was unable to respond nearly as aggressively to rate cuts today as it did in 1999 and 2003, as the high debt ratio is sustained by disposable income growth falling at a faster rate than households credit growth in recent quarters, said Loos.
He added that the affordable segment of the market has been the most recent casualty and can be seen as the segment where severe financial strain had been building up over the years.
Survey respondents from low-income areas reported a greater percentage of sellers selling in order to downscale as compared to higher income areas. Although it seems that times of financial stress will force buyers into entering the affordable segment, it seems like first-time buyers and those forced to downscale have rather opted to rent.
Loos added that former black township property behaviour displayed a similar weakening trend to the overall affordable segment. This causes great concern as the industries hit the hardest by the recession seems to employ those occupying the affordable segment.
John Loos, FNB’s property strategist said that the June house prices index show no sign of improvement and the 450 basis point shaved off the interest rate has had a marginal impact on property demand to date.
The rate of deflation for June came in at -10.2 percent year-on-year, compared with a revised -8.5 percent rate for May. On a month-on-month basis, the rate of deflation was -2.2 percent for June.
Although FNB has announced a mild relaxation on their credit policy is seems like banks have remained cautious. The debt-to-disposable income ratio also remained high and can probably be attributed to disposable income being under severe pressure due to the recession.
The pressured household sector was unable to respond nearly as aggressively to rate cuts today as it did in 1999 and 2003, as the high debt ratio is sustained by disposable income growth falling at a faster rate than households credit growth in recent quarters, said Loos.
He added that the affordable segment of the market has been the most recent casualty and can be seen as the segment where severe financial strain had been building up over the years.
Survey respondents from low-income areas reported a greater percentage of sellers selling in order to downscale as compared to higher income areas. Although it seems that times of financial stress will force buyers into entering the affordable segment, it seems like first-time buyers and those forced to downscale have rather opted to rent.
Loos added that former black township property behaviour displayed a similar weakening trend to the overall affordable segment. This causes great concern as the industries hit the hardest by the recession seems to employ those occupying the affordable segment.
Wednesday, July 1, 2009
Buyers Struggling To Secure Home Loans
This article is courtesy of Realestateweb (Home Loans: Banks stingier than ever – 30 June 2009)
The recent statistics release by the South African Reserve Bank confirms that buyers are struggling to secure mortgage finance. This resulted in mortgages advances reaching the lowest level of growth in 9 years.
According to Jacques du Toit, senior property analyst at Absa Home Loans, the data released showed that the year-on-year growth in mortgage advances slowed down to 9,4% in May this year. Also, on a month-on-month basis the outstanding balance on mortgage loans was marginally higher in May, after growth of 0,1% was recorded in April compared to March.
Du Toit added that the amount of outstanding mortgage balances in the household sector was slightly down to R708,3bn in May, from R708,4bn in April.
This shows that the recession is taking its toll on not only households but also mortgage originators relying on home loan commissions and estate agents who need to close property deals.
"Despite interest rates having been cut by a total of 450 basis points since December last year, mortgage advances growth is expected to slow down further in the near term on the back of prevailing economic conditions, which are a contributing factor in the relatively low demand for housing and mortgage finance," said du Toit.
The recent statistics release by the South African Reserve Bank confirms that buyers are struggling to secure mortgage finance. This resulted in mortgages advances reaching the lowest level of growth in 9 years.
According to Jacques du Toit, senior property analyst at Absa Home Loans, the data released showed that the year-on-year growth in mortgage advances slowed down to 9,4% in May this year. Also, on a month-on-month basis the outstanding balance on mortgage loans was marginally higher in May, after growth of 0,1% was recorded in April compared to March.
Du Toit added that the amount of outstanding mortgage balances in the household sector was slightly down to R708,3bn in May, from R708,4bn in April.
This shows that the recession is taking its toll on not only households but also mortgage originators relying on home loan commissions and estate agents who need to close property deals.
"Despite interest rates having been cut by a total of 450 basis points since December last year, mortgage advances growth is expected to slow down further in the near term on the back of prevailing economic conditions, which are a contributing factor in the relatively low demand for housing and mortgage finance," said du Toit.
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