Confidence is the backbone of life
Category Blog
Whether it pertains to sport, business, personal relationships, or buying/selling a home, confidence causes momentum. And momentum builds more momentum.
Recently a slew of articles, including The FNB Property Barometer and Moneyweb have indicated that since lockdown the property market has appreciated in value at over 4%. This is due to the 3% drop in interest rates and the associated affordability. A masterstroke by the government. This growth beats inflation for the first time in many years. It has given a huge, long overdue, injection of confidence in the residential property sector. Albeit an 'interest rate driven' boost it has caused, unexpected, lively activity and momentum in the lower levels of the market. The higher levels of the market are not yet experiencing the same growth or momentum. But as momentum causes more momentum growth at the higher levels of the market is inevitable, as long as positive sentiment continues
Predictions of economic growth
Given that the economy as whole had deteriorated to minus 7 per cent of GDP, which brought the country to a virtual standstill - various economic sectors of the economy have recovered spectacularly since then, the residential property included, while others have simply been wiped out.
It is against that background that economists are now predicting economic growth of 4 per cent-plus, albeit likely to come off the bottom of a low base. Yet it can cause confidence and a positive outlook for the residential property market.
Taking into account that confidence reinforces the impetus of homes market sentiment, their predictions may well open the window to a brighter picture for both buyers and sellers to contemplate... rather than hesitate. It has been a long awaited bounce back. Hopefully sustainable if interest rates don't rise too quickly.
Shortage of money
Looking ahead after 12 years of languid performance, it is not puzzling that the South Africa economy is still facing a shortage of money - mostly due to a trillion rand lost to corruption. South Africa's debt crisis still looms as a threat to economic traction. How that could impact on national sentiment is yet to be seen.
Meanwhile, it is comforting to note that South Africa's 'share price' - the nation's exchange rate - remains reasonably strong. If it holds tight at that level, momentum should continue to roll out.
The bottom line is that residential property is really cheap right now. It deserves to benefit from growth from this point onwards. Not least because interest rates are now at their lowest in 50 years!
Author: Ronald Ennik
