2009/02/16

The recent 1% cut in interest rates was far more meaningful than just easing the debt burden on home loan lenders.

This is according to Adrian Goslett, assistant regional director of RE/MAX of Southern Africa, who adds that the cut, the second in three months, gives serious foundation to a market recovery that in his view is in sight, fuelled mainly by the reduction in interest rates and more importantly rising market sentiment.

The main reason for market revitalisation is undoubtedly the underlying prospects of further interest rate cuts and the greater understanding by the man in the street of how interest rate adjustments are motivated due to massive media coverage given the issue.

A further factor is the growing belief among South Africa's higher income groups of the positive economic surety of South Africa when measured against the worldwide economic crisis and especially on those housing markets, which has dulled much of the gloss of South Africans-favoured bolt-holes in times of crises such as the United Kingdom and the USA.

The depth of the international economic crisis and the gloomy prospects of its recovery, particularly in those two countries, has elevated the quality of South African lifestyle attractions to one of rosiness while at the same time minimising its perceived disadvantages among both expatriates and foreigners wanting to return or relocate here. This, according to Goslett, is reflected by a surge in inquires from overseas and the number of recent unseasonable sales made to foreign buyers.

Frontline foreign interest is coming mainly from shell-shocked Brits spiked by the fall in the value of the British currency against other currencies, the worst winter in 20 years and that government's frantic, but controversial shoring up of its banking system. All of which Goslett says has flattened some of the earlier fears of buying here to be replaced by a gung ho attitude and a genuine desire to escape British general gloom and doom.

That infection, aided by reduced job opportunities, has also pessimistically infected many expatriate South Africans living in the UK or wanting to live there. Goslett says that emigration, as a percentage of selling by South Africans in the second half of last year, has evaporated considerably in the opening months of this year.

He also ascribes the recent improvement in sales – RE/MAX has witnessed a 10,2% increase in sales in November, December and February over the previous three months – to the man-in-the-street's better understanding of the cause and effects of interest rate patterns enabled by media coverage given the subject. Their balanced and sheer depth of measured reportage on prospects of interest rate improvements has instilled rising confidence especially when compared with South Africa's more popular emigration destinations.

Even so, he is still hesitant in forecasting the market has completely turned the corner, rather believing that the worst is behind us, but the immediate future, while much brighter than at the closure of 2008, still promises a bumpy ride before settling into a normal trading conditions with interest rates at around 11% to 12% in the first half of next year.

Property24