"The forthcoming Monetary Policy Committee meeting to be held this week (February 5, 2009) will hopefully see some additional relief afforded to consumers in terms of a further reduction in the repo rate, with a resultant drop in the interest rate," says Dr Andrew Golding, chief executive of the Pam Golding Property (PGP) group.
"With more rate cuts anticipated during 2009, whether these translate into a total interest rate reduction for the year of three, four or even five percent, there is no doubt that while these will take time to flow through the system the immediate effect will be to stimulate more positive sentiment which is always a key driver in the marketplace - and for the economy in general. Naturally such rate cuts will also help alleviate the pressure on those paying mortgages on their homes, and help increase affordability for those seeking to acquire their first homes.
"The current status quo as far as the residential property market is concerned is that of an air of increased optimism. The start of each calendar year generally tends to have increased transactional movement in the residential market - particularly among those relocating for business reasons. Although there are currently less overseas buyers than usually evident at this time of the year, we are still receiving enquiries from interested foreign buyers - including South African expatriates - as they perceive increased value in our property market, with sound investment opportunities currently available.
"We are also seeing an increase in the number of buyers prepared to commit to offers as buyers and sellers have become relatively more acclimatised to the current economic scenario and more stringent lending criteria. However it has become apparent that the general requirement by financial institutions of at least a 10 percent deposit for the purchase of a home is creating major constraints - particularly for first time buyers - with the knock-on effect of sustaining reduced transactional volumes. Generally and unsurprisingly, we also note a trend towards more cash deals as opposed to mortgage-financed sales in transactions than previously.
"In terms of the forthcoming Budget, we would like to see some alleviation of transfer duty costs, and also hope that there will be no increase in personal income tax. We are mindful of the fact that the South African economy needs to have a realistic chance of achieving growth and that as a country we need to look at additional ways of attracting foreign direct investment. With preparations for the 2010 Soccer World Cup - including infrastructural improvements - progressing well, there is no doubt that this major event will focus the international spotlight on South Africa, creating significantly increased worldwide awareness with potential tourism and investment spin-offs for many years to come.
"From a residential property pricing perspective, we anticipate that house prices are likely to decline this year (2009) by approximately 10 percent - in real terms, with the start of a recovery probable towards the end of 2009. However, with increased positive sentiment we also expect transaction volumes (units) to increase by around 15 percent over 2008."
Issued by Gaye de Villiers