Mornin' all. So the repo rate is now half a percent lower than it was at the height of the property bubble in 2005. In fact it's lower than it's been at any time since 1999. And still Home Ownerists and property propagandists can only talk green shoots, promising signs, hopeful indicators. Not shoot-the-lights-out price increases, not double digit price inflation, not hordes of FTB's lining up to buy.
If the lowest rates in 11 years can't produce a raging bull market then I think we have conclusive proof that the property party is over.
Global inflation is coming. And our rates can only go one way. May God have mercy on the souls of the suckers who've been pulled in by this bull trap and bought at "bargain" prices.
Great insight Bean Counter. I would like to add: 1. Stay away from property 2. Stay away from debt (if possible). 3. Stay away from bank savings 4. Buy gold & silver
Well there is a widely accepted lag between cutting interest rates and an upward pressure on property price (because the price of borrowing money is lower and borrowed money is needed for most property purchases).
However the cost of money is not the only factor affecting demand. Everything from emigration, employment and general sentiment to the weather affect the demand for property. No points for guessing what general sentiment or employment prospects are doing for property prices.
I suspect that the MPC of the SARB has finished dropping interest rate for this cycle although it's unlikely that it will raise it either in the short term.
Interestingly, national inflation has fallen a small amount recently, but the Cape Argus food basket, which is a good instant barometer of what is happening NOW, is showing an inflationary up turn over the last 3 or 4 months.
Prices are still in deflation territory over the year but it will be interesting to see if this spike up returns down or keeps shooting up.
If it is the latter then this could be an early warning that inflation is on the move again and that means rates will have to move up again to stop the rampage.
It will be interesting to see what it does over the next few months. Is this a temporary blip or a new trend.
Remember, the rand presently is super strong. If that weakened like it has in the past when this strong, then that alone will be very inflationary.
Well noted CJ. A good analyst who has been calling it right so far on the 'inflation mega trend' is Nadeem Wayalat. See : http://www.marketoracle.co.uk/Article18125.html
Now my question to everyone here is: What does one invest in if we are moving into an inflation mega trend? I understand that property is a pretty good option....anything but cash.
If you hadnt actually noticed we have been in an inflation mega trend over the past 10 years. Property has inflated beyond anyones wildest dreams as has food, fuel etc.
What has deflated is computers, cellphones, big screen teevees etc
In short, everything you need has inflated and that which you dont has deflated. People only feel more well off because they can afford many electronic luxuries and big vehicles, or have lived beyond their means with credit (perhaps they flipped a house or 2?). Are they more well off in time, peace of mind, good relationships, self sufficiency or happiness?
Invest in food; a garden, a herd of cows or a good store of food (say no to the just on time systems). Invest in a small efficient vehicle. Invest in some gold and only if the price is very very very good, a property (purely because speculation and cheap money was the reason for inflation unlike food etc). Invest in good karma and say no to being a shafter landlord, general @sshole and predatory capitalist.
In 2008 they were bailing out banks, now they are bailing out countries. You think its getting better like they say on the teevee? A shitstorm is approaching my people, you have a few months but be prepared by early July for all eventualities as it begins then.
No one knows how this shift will transpire and how the old will fight with the new for dominance. One thing is certain however; finance capitalism is dying, the world is changing big time and people need to pull finger.
Dont sit on a property blog thinking where you can make your next million and get with the program, personally and financially.
Just curious about the impact on construction costs in Cape Town - are builders dropping their prices? I remember hearing that maybe 2 years ago at the height of the property market, the builders would want around R5000 per square metre for an average quality family home. Assuming that there's less building demand out there, are prices lower now than 2 years ago???
Yikes! Joel does your listed amount include or exclude the land? Mine was excluding land, so e.g. you already have the land and you go to a private builder to build your home. A 200 sqm house would cost around R1 million - add extra Rands (say R100k) if you want better finishes and landscaping. Let's say the plot costs R700 000, so you are at R1.8 million. If it really is double that then the construction would be what? R2 million? Add in the land and you are pushing R3 million. Unless the house is in a fancy area (but then the land wouldn't have been R700k) then I'd say R3 million for 200sqm would be 50% over priced... then surely nobody is building... and if demand falls then builder prices should fall.
15 comments:
Mornin' all. So the repo rate is now half a percent lower than it was at the height of the property bubble in 2005. In fact it's lower than it's been at any time since 1999. And still Home Ownerists and property propagandists can only talk green shoots, promising signs, hopeful indicators. Not shoot-the-lights-out price increases, not double digit price inflation, not hordes of FTB's lining up to buy.
If the lowest rates in 11 years can't produce a raging bull market then I think we have conclusive proof that the property party is over.
Global inflation is coming. And our rates can only go one way. May God have mercy on the souls of the suckers who've been pulled in by this bull trap and bought at "bargain" prices.
Great insight Bean Counter.
I would like to add:
1. Stay away from property
2. Stay away from debt (if possible).
3. Stay away from bank savings
4. Buy gold & silver
Yep - sounds like Peter Schiff.
http://www.fin24.com/articles/default/display_article.aspx?Channel=News_Home&ArticleId=1518-2386-2401_2577716&IsColumnistStory=False
Not all green shoots
Well there is a widely accepted lag between cutting interest rates and an upward pressure on property price (because the price of borrowing money is lower and borrowed money is needed for most property purchases).
However the cost of money is not the only factor affecting demand. Everything from emigration, employment and general sentiment to the weather affect the demand for property. No points for guessing what general sentiment or employment prospects are doing for property prices.
I suspect that the MPC of the SARB has finished dropping interest rate for this cycle although it's unlikely that it will raise it either in the short term.
LS
Rates, electricity and fuel price increases are going to off set any gains home owners may get from the rate cut in any event.
Interestingly, national inflation has fallen a small amount recently, but the Cape Argus food basket, which is a good instant barometer of what is happening NOW, is showing an inflationary up turn over the last 3 or 4 months.
Prices are still in deflation territory over the year but it will be interesting to see if this spike up returns down or keeps shooting up.
If it is the latter then this could be an early warning that inflation is on the move again and that means rates will have to move up again to stop the rampage.
It will be interesting to see what it does over the next few months. Is this a temporary blip or a new trend.
Remember, the rand presently is super strong. If that weakened like it has in the past when this strong, then that alone will be very inflationary.
Well noted CJ. A good analyst who has been calling it right so far on the 'inflation mega trend' is Nadeem Wayalat. See : http://www.marketoracle.co.uk/Article18125.html
Now my question to everyone here is: What does one invest in if we are moving into an inflation mega trend? I understand that property is a pretty good option....anything but cash.
If you hadnt actually noticed we have been in an inflation mega trend over the past 10 years. Property has inflated beyond anyones wildest dreams as has food, fuel etc.
What has deflated is computers, cellphones, big screen teevees etc
In short, everything you need has inflated and that which you dont has deflated. People only feel more well off because they can afford many electronic luxuries and big vehicles, or have lived beyond their means with credit (perhaps they flipped a house or 2?). Are they more well off in time, peace of mind, good relationships, self sufficiency or happiness?
Invest in food; a garden, a herd of cows or a good store of food (say no to the just on time systems). Invest in a small efficient vehicle. Invest in some gold and only if the price is very very very good, a property (purely because speculation and cheap money was the reason for inflation unlike food etc). Invest in good karma and say no to being a shafter landlord, general @sshole and predatory capitalist.
In 2008 they were bailing out banks, now they are bailing out countries. You think its getting better like they say on the teevee? A shitstorm is approaching my people, you have a few months but be prepared by early July for all eventualities as it begins then.
No one knows how this shift will transpire and how the old will fight with the new for dominance. One thing is certain however; finance capitalism is dying, the world is changing big time and people need to pull finger.
Dont sit on a property blog thinking where you can make your next million and get with the program, personally and financially.
Just curious about the impact on construction costs in Cape Town - are builders dropping their prices? I remember hearing that maybe 2 years ago at the height of the property market, the builders would want around R5000 per square metre for an average quality family home. Assuming that there's less building demand out there, are prices lower now than 2 years ago???
@Jules - don't know where you got your figures from, but they are about half.
R10k per sq m is for an average finished home, at present an architect tells me that it is R12k.
Would be interested to hear from other people.
Yikes! Joel does your listed amount include or exclude the land? Mine was excluding land, so e.g. you already have the land and you go to a private builder to build your home.
A 200 sqm house would cost around R1 million - add extra Rands (say R100k) if you want better finishes and landscaping. Let's say the plot costs R700 000, so you are at R1.8 million. If it really is double that then the construction would be what? R2 million? Add in the land and you are pushing R3 million. Unless the house is in a fancy area (but then the land wouldn't have been R700k) then I'd say R3 million for 200sqm would be 50% over priced... then surely nobody is building... and if demand falls then builder prices should fall.
Anyone else have info?
And now for a good laugh:
http://capetown.gumtree.co.za/c-Flat-House-Real-Estate-vacant-land-properties-for-sale-Units-for-sale-in-De-la-Haye-Bellville-W0QQAdIdZ195107290
@Jules
That is just the price for building. A 200 sqm house on a plot of about 400 sq.m on the A Seaboard / City Bowl and you are in for about R4.5m.
Stupid n'est pas?
Eina Joel!!!
That is a crazy price. Lucky I am not rich enough to afford to be that stupid.
;-)
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