Market Update

The decision by the South African Reserve Bank’s Monetary Policy Committee to retain the repo rate at 7% brought some good news, thus leaving the prime interest rate unchanged at 10.5%, now for the past year. Some good news also came in the form of a lower inflation rate at 5.3% (down from 6.1% in March).

On the downside, we have seen further downgrades by Moody’s as the country continues to grapple with economic and political instability. With 2 consecutive quarters of negative growth, we officially find ourselves in recession. Further to this, we've seen some deterioration in business confidence and a knock-on effect to the property market with declining demand and house prices under pressure.

That said, the Cape property market continues to be the stand out performer with FNB also recently pronouncing it as such; both from a demand point of view as well as average price growth.

There is no doubt that we are in a period of caution where decisions must be taken with care. Given the economic strains, consumers and property buyers are likely to keep their spending to a minimum and cut back on any excessive luxury, something that may well affect the investment property sector. Most of the activity is likely to now focus on the primary residential property market with most buyers looking for own-use properties.

The Cape has a strong rental market, especially high demand areas such as the City Bowl, Atlantic Seaboard and other coastal areas. This means that investor buyers might still be looking for well-priced investment properties that will suit the rental market demand.

Buyers are likely to start thinking about the economic shifts anticipated over the coming months, such as higher interest rates and further cost rises which may impact their ability to service their home loans, if applicable. Buyers thinking about investing in a rental property, may need to start thinking about whether the rental price that you have in mind will be achievable should there suddenly be a flood of stock on the market in the coming months.

If you are looking to sell, then you may need to think about what price you would be looking to achieve. If you are holding out for a higher price because you aim to make a good return on your investment, then perhaps you might want to hold onto your investment until the market improves. If on the other hand, you want to sell for other reasons, then now is still a great time to sell your property.

From a Coastal Property Group perspective, while economists are pointing to more subdued trading conditions ahead, we still anticipate a good level of activity both in terms of sectional title sales and rentals in key Cape locations.