Residential Property Sector Reaction: Moody's Downgrades

Reacting to the slew of Moody’s downgrades that sliced through the country’s financial sector and corporates as well as state-owned enterprises and local and regional governments, Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, commented that they were “the economic equivalent of the lower decks of the Titanic filling with water”.

“Crucial Cabinet portfolio changes and national policy statements this year have done little to encourage international investor confidence in South Africa and this news from Moody’s is a further setback to any prospect of economic recovery in the medium term.

“The downgrading of the IDC, Land Bank and DBSA are particularly disappointing, because economic transformation will be further stifled or at least substantially slowed. This is the opposite outcome to the intended objective stated by the government as the reason for its radical policy shift, and economists will no doubt view it as an ‘own goal’,” says Geffen.

“In terms of the real estate market, a more depressed national economy directly impacts the rate of job creation, further squeezes household finances, tightens lending criteria and puts the ability to amass general savings and mortgage deposits beyond the reach of even more consumers.

“FNB’s May House Price Index notes that year-on-year inflation for the month rose slightly to 4.7%, ‘but remains a mediocre market, and adjusting for CPI inflation implies a negative growth rate in real terms’.

“It will obviously take a while for this latest round of downgrades to have a direct impact on consumers, but they will feel it more and more the longer it takes for international investor confidence to be restored.

“This will only happen with a sustained demonstration of responsible macro-economic policy management and good governance – neither of which appear to be on the cards for now.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us