'Slow ahead'- Appropriate for real estate recovery?
Numbers just out from FNB and ABSA agree with SAPTG figures and show a less than thrilling path for property recovery. While some growth in the first two quarters created the impression that the path to recovery was on track, albeit at a lukewarm rate, latest statistics point to additional difficulties, more threatening than previously envisaged. Our erstwhile optimism is being tempered more and more, with realism.
BIG BROTHER
While we are nowhere near the desperate position of the USA we nevertheless continue to feel the effects of their contagion. Continued macro-economic risks on the global front, and notably, in the USA as well as Eurozone countries are creating darker clouds and giving investors the jitters. Economic 'meteorologists' are seeing more thunder and lighting than sunshine and roses. While in the USA, Ben Bernanke and Barack Obama have little ground to maneuver with an ever widening output gap and an economic bail-out package resembling Monopoly money, South Africa’s real-estate market has seen the positive effects of rate cuts play out faster than is normally the case.
RATE CUT
The markets have all but figured in a 0,5% cut on the 9th of September. That being said, Gill Marcus and her MPC have been known to surprise us (both on the up- and the down-side). So before estate-agents and potential buyers break out the champagne we must concede that a small cut (less than 1%) will do very little in the short-term to engender a passion for buying property or give the industry as a whole the injection it needs.
The industry is still in a fragile state. FNB’s report points out that South Africa remains highly exposed to global economic events and the magnitude of the housing market slowdown may be directly proportional to the magnitude of the global slowdown.
POOR MANAGEMENT
From a national perspective, our debt level, though off the high of 83% in 2008, remains worryingly high at over 78%. This state of affairs does nothing to induce greater latitude on the part of lenders. As a country we score poorly in personal financial management with less than 40% of credit-active consumers being current on their debt repayment. Neither are we a nation of savers, rather we spend, spend, spend and then spend some more. Although our recent economic woes and a recession-hit economy have been a wake-up call for some consumers, keeping up with the Jones, Buthelezis or the Van der Merwes remains as popular as ever. Never before have we seen such a proliferation of debt counseling services. The public-sector strikes are symptomatic of a populace determined to get as much moola as possible behind the guise of demands for a ‘living wage’.
SOMETHING GOOD?
SAPTG data does show some positive growth however. Full title sales have helped to boost overall value of sales in the R300,000 to R5 million band to over R100 billion for the first time in a number of months. Real rate median growth in both sectional title and full title Rand value are good signs – or are they? Certainly we do not read this to be the eye of a storm but the brittle state of the market engenders unease.
Some realtors are upbeat, and others glum – depends on the area they work in, of course. Many are involved with the new educational requirements for this profession and have staked their claim on their chosen career. We welcome such professionalization as everyone, buyers and sellers, will be better off with dedicated and well trained property professionals.
If, on the night of 14 April 1912, the captain of the Titanic had ordered “Slow Ahead”, and caution had prevailed, a tragedy may have been averted. The recent real estate data would suggest that a similar call is being made for the real estate industry to avoid the hidden dangers that continue to lurk below.
Dieter Deppisch
Head: Property Data Research (SAPTG)