"While anticipated, the decision by the Monetary Policy Committee meeting to leave the repo rate unchanged (January 26, 2010) will disappoint many, as although we are seeing some positive indicators it is evident that South Africa's economy is by no means out of the doldrums, particularly with the looming outcome of the Eskom tariff decision and concomitant effect on inflation. So a further boost for the economy would have been most welcome.
We are still hopeful that the interest rate may decrease further during the course of this year (2010).  However, what the market also needs is for the mortgage lending confidence of the banks to increase. We did see a small improvement in mortgage lending during the last six months of last year (2009) but on the whole mortgage lending criteria are still strict and banks are lending selectively.
Despite this we anticipate that the reductions in interest rates which were implemented during the course of last year will manifest themselves during this first quarter - which is traditionally an active period for buying and selling of property with those relocating for business and other purposes. The latter includes an increasing trend towards those relocating for educational purposes, seeking good access to schools. Having said that, while we remain cautiously optimistic, the housing market is by no means buoyant.
The current residential market must be viewed against a backdrop where the common view is that the negative trend in house price growth has halted and we are seeing consistent positive growth in house prices, albeit very moderate. We anticipate that nominal house price increases, ie taking inflation into account, will be at levels of around six or seven percent per annum.
Importantly, sentiment around the Soccer World Cup is increasingly upbeat and is having a positive impact on foreign direct investment. We have seen increased interest from overseas home buyers with sales concluded over the festive season - and we expect the uptake from foreign purchasers to increase leading up to the World Cup but particularly thereafter. The single biggest factor in regard to this anticipated increased demand is the huge exposure South Africa will receive globally.
It is a strong trend that among those who visit our shores on holiday, conference or for whatever reason, there are those who will return and then consider purchasing property here. This is a process which can take several years, and now that we are being elevated onto the world stage during an event which will draw enormous and unprecedented attention to South Africa, we expect that in ensuing years we will see an upturn in investment in property among overseas buyers."
Issued by Gaye de Villiers

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