The Economy And Its Impact On The Local Residential Property Market

1. What effect, in your opinion, will the rand’s dramatic fall against the dollar have on the property market?

It’s all about the impact on inflation, but in South Africa now, the weak rand has had a relatively muted effect on inflation because of the very low oil price. It’s worth bearing in mind that, simplistic as it may sound, property is priced in rands, so even though global events impact our economy, we are still paying in rands. So, in essence – barring any unexpected shock - our property market shouldn’t be much affected.     

2. Do you believe that there will be interest hikes and if so, what impact do you think this will have on the property market?

Yes, there are likely to be one even two interest hikes this year, but – barring any external or internal shocks - I don’t believe we’re in for any large, dramatic rise. As with last year, rates are likely to nudge up in a slow, orderly, managed fashion. 

3. Do you believe that banks are going to clamp down on the granting of  bonds or at least raise the amount required for deposits?

No I don’t believe they’ll do either. Banks have been conservative for some time now, and as responsible lenders governed by the national credit act, their loan criteria are sufficiently regulated.  

4. Do you have any tips for homeowners to survive during these trying times?

Easy to say, harder to action, but there are only two rules: stop spending on luxury items and outings, and rid yourself of debt, starting with your highest interest-bearing debt and proceeding downwards. Look hard at the interest you’re paying on store cards, credit cards, even your car. Don’t spend on depreciating assets. Forget about the Jones’, and live within your means. If you’re buying a property, factor in potential increases in the interest rate, and ensure that you can either fund those easily, or cut back elsewhere to afford them. 

5. Do you think that the increase in interest rates will cause buyers to panic sell?

If the increase is small and steady, no; if some external factor causes a big, quick jump, then yes, it’s possible. But, for a number of reasons, you really don’t want to ‘force sell’ your property, so if you are concerned now about your financial situation, do whatever it takes to eliminate other debt to enable you to ride out a potentially difficult cycle. On the positive side, we are seeing very few cases of homeowners with negative equity.     

6. Would you recommend that homeowners who are over in-debited sell their homes and rent?

Always take action immediately you realise your situation is becoming untenable. Don’t ignore it, it won’t disappear. If this is feasible, ask your bank if you can renegotiate the term of your home loan. Your home loan is your cheapest debt, so rid yourself of other expensive debt first - downsize your car before selling your home. If you cannot see your way out, then consider selling a large house and downsizing into a small one. Currently, rentals are high, so renting isn’t always the answer. Your home should be the last thing to sell.  

7. Do you believe that buyers should opt a 'wait and see' approach in the short-term before investing in property? If not, why? 

No, buyers should be looking at it from their personal cash flow point of view. Property is not an impulse buy, so if you have saved your deposit and planned your monthly expenditure on a home loan and other related expenses, there are some great buys out there. If you find the home you want to live in, you’ve done your homework so you can accommodate a manageable rise in the interest rate, and it makes sense for you to buy it now, do so. I don’t believe there is any reason to wait.