The Reserve Bank has cut interest rates by 0.25 percentage points, amid indications that international oil prices could fall further and that slowing global growth could prompt a round of rate cuts by most major central banks.

The repo rate is the benchmark interest rate at which the Reserve Bank lends money to other banks. Changes in the repo rate affect the prime lending rate, which is the lowest rate at which banks start lending to clients.  With the repo rate down, the prime lending rate will decline to 10% from 10.25% and will translate, into a saving of R16 a month per R100 000 borrowed for existing homeowners.

“Today’s announcement that the South African Reserve Bank has dropped the repo rate bodes well for the property market,” says Sandy Walsh, MD Property.CoZa South Africa.  “We have been waiting for a positive announcement like this and trust that this cut will bring some relief to our lacklustre market and stimulate buyer interest. More importantly, the cut may assist new bond applicants to achieve their qualification amount, known as gross household income.  An applicant seeking a R1 000 000 bond, providing income of R33 000, should meet the gross household income criteria. If a bond holder has a loan of R1 000 000, this repo cut will save R166 each month.  This may not seem much, but over 15 years this adds up to R29 880!“ says Walsh.

Source: www.businesstech.co.za

July 21, 2019

The South African Reserve Bank’s Monetary Committee met to discuss the current interest rates late last week.  A decision was made, to accommodate the lethargic economy, that the repurchase or repo rate will remain at 6.5%. In turn, the prime overdraft rate will also maintain at 10%. This is good news for homeowners as the prime overdraft rate determines the interest rate on home loans and commercial bank lending.

The SARB Monetary Committee commented on interest rates in South Africa over the last 25 years, which have averaged at 12.58%, reaching the highest in 1998 of 23.99% and the lowest of 5% in 2012.  A lending rate of 10% provides an opportunity for investment at the moment, especially since the banks and bond originators in South Africa are still showing a willingness to lend regardless of a lackluster economy. Unchanged interest rates also mean that homeowners should be able to maintain current bond repayments.

“We welcome the news that interest rates will be maintained and not add to the already burdened consumer,” said Sandy Walsh, MD of Property.CoZa. Walsh added that the market is certainly leaning in favour of the buyer, considering the current stock of properties. “There may be slow price growth and prices will inevitably have to be lowered, leading to a healthy willingness from the banks to lend”.

Nevertheless, the current situation leaves room for sellers to make a choice to sell now instead of sitting on the fence or waiting for unrealistic offers. The market will most likely remain in over supply for the remainder of 2018 and into 2019. While the interest rate remains low, the option to sell may become more appropriate.

July 3, 2019

What is a technical recession?

In early September, StatsSA announced that South Africa has reached what is considered a technical recession. This is defined as two consecutive quarters of negative economic growth, the likes of which have not been seen since the 2008/2009 global financial crisis. The indicators of the decline were clear when the Real Gross Domestic Product (RGDP) contracted by 0.7% in the second quarter of this year, following a recently revised 2.6% contraction in the first quarter.

What are the possible effects?

Negative economic growth causes a knock-on effect filtering into all sectors of consumer behaviour. With a tightening in everyday spending there is a gradual tipping of the scales of supply and demand. The imbalance in consumer conduct causes inflation.  To compensate, interest rates may rise, and businesses may be forced to cut costs by retrenching employees, downsizing and restructuring.

What caused the technical recession?

It is difficult to pinpoint the direct cause of a recession. It makes more sense to consider the confluence of multiple factors that usually cause these ‘depression’ like phenomena in general, and then consider the specific characteristics unique to South Africa.  Professor of Economic and Business Sciences at WITS, Jannie Rossouw, said on a recent review that demand is and has been subdued. Since 2017 small and medium business owners have reported that demand is down. Demand could be depressed due to the slow rise in prices for goods and services, as the rate of inflation rises, those same goods and services can no longer be purchased for the same amount as before. A purely South African factor is the post-Mandela political scandals that have played out in the media and directly created a strenuous relationship with international investors and diminishing confidence in potential investment. Service delivery mismanagement; 27% unemployment rate and government corruption have been widely publicized overseas and not surprisingly investing in an unstable environment such as this is unappealing.

What does this mean for the real estate market?

The phrase ‘buyer’s market’ has been popping up in recent months. This mirrors the process of inflation whereby the supply of houses is greater than the demand from buyers. The reason it’s considered a ‘buyer’s market’ is because the surplus of houses gives the buyer more choice. Due to the decrease in demand, sellers are often forced to lower their prices to attract buyers. Therefore, buyers have a chance to purchase property for lower prices. If economic recession continues for an extended period, stunted spending due to higher costs could spill over into households. Homeowners, unable to pay bonds may be forced to sell their properties or banks may repossess them.

A cautiously optimistic outlook

Although recent reports of the technical recession have caused some concern, an optimistic outlook might be worth considering. Overberg Asset Management analysts advised News24 that “although clearly disappointing it is a very shallow recession and not one that is likely to persist into the third quarter.”

Sandy Walsh, MD at Property.CoZa South Africa, gives this advice:

• Speak to a knowledgeable property professional about property prices in your area.
• Do thorough online research to truly understand the current prices and check multiple sources.
• If you’re selling your property, be prepared to adapt your prices to the changing market conditions. Your property professional should be equipped to counsel you on this. Request a written property valuation (also referred to as a Comparative Market Analysis) with supporting statistics of actual properties which were sold in your area, as well as what is currently available ‘For Sale’ in your area. Remember that sellers also do their homework and comparisons…
• Feel free to request a marketing plan from your local area property professional. Be weary of potential buyers who have not been screened by your property professional. Knowledgeable property professionals specializes in their trade, and in most instances they already have a qualified buyer’s database on hand. They spend their time and money to be good in what they are passionate about – ‘selling your property at the highest price, in the shortest time frame with as little hassles as possible’.

July 3, 2019

With the unprecedented rise of the internet, businesses worldwide have had to jump on board as quickly as possible or be left behind. An online presence is important to provide widespread exposure for any successful business. The internet allows access to a plethora of information, globalisation in all industries and a unique buying and selling experience. With this in mind, it is no surprise that online virtual real estate agencies have begun to emerge in a technologically-driven world demanding immediacy and ease. These online agencies provide an agent-less service, completely online. A question that has been raised recently among professionals in this industry is: How effective are these remote offerings and is there still need for a human component within the real estate industry?

The initial allure of online real estate agencies is the promise of lower commission rates for services provided to a Seller. If you choose to sell your home exclusively using one of the sites, most of them will offer a professional photographer to take photos of your home and may even offer drone footage.They will market the property on their site as well as well-known portals like Property24 and Private Property and on social media. They may include a viewing schedule, an online calendar used to arrange dates and times for people to book a viewing, verification of viewers, and online support.Some online agencies also offer ‘for sale’ boards, ongoing legal assistance, a valuation of your property and daily online support. For these services, online agencies offer a commission fee of 1-2% of the selling price or from R39 500, excluding VAT, and in some cases a nominal initial fee is required.

At first look, the virtual offering ticks all the boxes, but there are many other factors to consider. The property layman may not necessarily know the steps in the process of selling a property, the time-consuming and tedious back and forth between parties, advertisement needs and how to organise and conduct show days. Online or remote agencies may offer aspects of these services, but the seller will have to do the leg work. Traditional real estate agents also have access to similar technology to provide a full service.

“Property.CoZa prides itself in being ahead of the crowd when it comes to technology and automating functions and we believe this should be used in conjunction with forming trusting relationships with our clients. This will afford real support through the selling experience and our property professionals dedicate themselves to every aspect of their client’s needs”, says Sandy Walsh, MD at Property.CoZa. Consultants from online agency may not physically meet you, reducing the possibility of a personal, trusting relationship forming and you may have to deal with the negotiations with buyers when they view your property. This requires knowledge and experience and agents generally provide the comfort of experience to guide you through this process.

“An estate agent is required to complete a mandatory qualification within a certain timeframe, in terms of their regulating authority, the Estate Agency Affairs Board. An agent starts their career serving a one-year internship under the guidance of a professional real estate mentor.” Says Walsh. “This internship lays the foundation for the agent to learn and earn with the full support of a mentor to provide knowledgeable service to a seller.” With experience and due diligence, a good agent will have a network of professional contacts, including; the support of their own sales team and fellow estate agents from other agencies to source more buyers, compliance inspectors, attorneys, landscapers, contractors, etc. to manage the sales process. “If a virtual agency is earning commission, the people who are assisting you should have these qualifications too.”

A traditional agent will have extensive knowledge of your area, a good understanding of the market trends as well as any potential legal pitfalls and will know how best to price your property to present to the market. Marketing and advertising properties is second-nature to an agent and exposing their stock of properties on relevant property portals using professional photo and, where appropriate, drone or video footage is how they implement their normal marketing strategies. Negotiation skills are what makes a good agent and presenting real interest from the market to a seller is best received face-to-face. Once the sale is in progress, professional resources within their agency to ensure legally sound contracts and financial services for the buyer, where a mortgage bond is required, should be provided to facilitate the transfer of the property. Feedback is essential at this time and this can be automated or personally provided by an agent.

“Viewings and show-days provide the perfect opportunity for agents to meet buyers and present their properties as well as the opportunity to listen to the buyer’s needs. There is usually time for deeper discussion and the opportunity to form a relationship”, says Walsh.“Virtual agencies expect the seller to present their property to potential buyers and this may be difficult and limit negotiations”. As a Buyers often see the value of a property differently to the Seller, it is best that both parties are given guidance by a third party to avoid unpleasant interactions.

For buyers, having one property professional representing your interests with an expert eye on finding the property of your dreams is the best.  A show day may be where you find your dream property, but there’s always that niggle that there may be something else, a good agent would have several options to show a buyer.

“It will be interesting to see the effectiveness of these disruptors in the real estate industry given that they’re fairly new and not really disruptive to the traditional, established agencies”, says Walsh.“Online agencies offer a platform of applications and services to sell houses which are only a part of what a property professional can provide and experience, market knowledge and social skills are difficult to discount when it comes to negotiation and closing a deal.”

Selling a property can be stressful and careful consideration should be given to how much time and energy, both mental and emotional, is required to navigate the complexities without the comfort of an experienced professional to guide you and negotiate the best price on your behalf.

July 3, 2019