Scenario 1: More of the same. Banks asking 20 - 30% deposit meaning that due to the extremely low interest rates many people can afford the repayments, just not the deposit. Market dead. If banks start with their 100% or even 110% bonds again we have the foundation of a very bad crash, especially due to the low interest rates, but not before a huge upward spike. Sub-prime style. Alternatively those who can save the 200K for a deposit are usually financially intelligent, which is about 0.2% of South Africans. This means a slow dreary market, property appreciating much lower than inflation. What do the FSB bottom feeders call that? "Negative Growth"?
Scenario 2: Increase in fuel cost combined with low interest rates combined with those who are priced out of property spending their cash on cars and retail instead, resulting high inflation, reserve bank freaks out and we have a huge interest rate spike. Those who just bought property based on their affordability of the monthly repayments (99.8% of those who bought in the last 2 years) and those who maxed their credit cards or bought new cars as they became accustomed to the low interest rates will be forced to sell or repossess. The government will realize that this includes 100% of the Black Diamonds (bless their souls) and will strengthen the rights of those under debt counseling, preventing the banks and others from taking their own back, including the Cadillac with 22" rims. This causes the big 4 to get sketchy, maybe even bailouts. Capitec shares skyrocket further as China exploits the cheap labor of the previously township dwelling dude, pushing up their lending power.
Scenario 3: People get desperate. Developers that are also conveniently financial providers sell cheap white mans low cost housing with cash-backs to furnish the place (like Summer Greens, and Burgendy Estate). No transfer duty. 100% bonds at very high interest rates but who cares, we will never see 15% - 16% like before ... surely not? These look alike properties in Sunningdale, Durbanville, and Muizemberg become all the rage for FTB. The rest of the market is dead, no sellers no buyers, inflation eats away at their value.
Scenario 4: The global economy stabilizes. The Rand depreciates as the dollar / euro strengthen. SA benefits due to more exports. Many expats move back to SA along with their strong currencies. Property prices begin to rise. Banks offer 100% finance and property once again seems like a favorable investment. CT Bubble and Bean Counter become Estate Agents in Bellville.
I'll have a go, if only to see how wrong I was a year from now.
Rising fuel and food prices in the US leads to higher inflation. The Fed uses a benchmark that excludes Food & Energy (madness!), but this will have a chain reaction with regards to other good & services. Pressure grows to increase interest rates, but the Fed realises it will worsen the housing and commercial property situation even more. I.e. Ben "The Illusionist" Bernanke might actually realise he cannot have his cake and eat it too. Either maintaining low rates or raising them causes problems. Wikileaks exposes gross malfeasance in the mortgage operations of Bank of America, re-igniting public anger at the banks.
Public sector layoffs in the UK begin. The UK housing market stays flat or drops due to the layoffs and accompanying uncertainty. Positive price pressure of energy and food competes with negative pressure from job losses. The Bank of England underestimates the effect of rising commodity prices, and Mervyn has to write another letter. More protests from students and public sector workers. I leave the UK.
The cost of debt continues to rise worldwide, putting pressure on European government bond sales. Speculators take up large short positions on Portuguese and Spanish bonds. Pressure grows within Germany to not support European sovereign bailouts.
The Chinese learns a lesson on the limitations of centralised control and loses it's grip on inflation and property prices. China finally let's the renminbi appreciate to combat inflation and boost domestic consumption. It buys less European and US treasuries, making debt more expensive in the West.
Because of increasing interest rates in the rest of the world, less carry trade means a depreciating Rand, which is good news for SA exports. But fuel prices keep rising, leading for higher inflation and a moderate increase in interest rates. SA property stays stagnant, inflation eating away at value slowly but surely. The ANC suffers in the local government elections, improving opposition politics.
Since I bought a flat and joined the Dark Side, my outlook has been split straight down the middle: I hope property will crash to prove me right but I pray that it won't so I can stay solvent.
However, my 2011 prediction suits both my outlooks.
I'm going to shoot for the moon and predict that 2011 is the year the Euro disintegrates as Herr and Frau Deutschland get tired of working harder and longer so that the French can work less and the Greeks not at all.
The northern European powers will quickly re-align, forming a kind of uber-Euro free of the Mediterranean muck, but until that happens - 2012? 2013? - global investors will go screaming straight for the dollar and commodities. If the US is still shaky, they'll pile into resource-rich economies even more.
We're not exactly a BRIC, but we do have yellow shiny stuff in the ground, so the Rand will stay strong, producing low interest rates (or at least stable and low-ish rates) which in turn will not light the long-awaited fire under the bums of reluctant property sellers.
I think most of us on this blog agree that the ONLY thing that can break the deadlock is a steady and meaningful rise in interest rates. The banks are not going to blink first: it is up to the home-ownerists to crack under their crippling debt. I don't know what it would take to get through the think heads of SA's home-ownerists, but I know most would rather hawk the silver and flog the kid's university tuition than miss a car repayment or lose their slavebox. We are financially retarded, utterly obsessed with new cars and horrible faux Tuscan shoeboxes, and I think even the most cynical amongst us would be amazed to see the lengths most Saffers would go to to keep their prized assets.
SO, I think we'd need a bigger interest rate shock than most countries - perhaps a 5 percent hike in under a year - to spread the kind of panic needed to get the ball rolling.
But if the Euro cracks, as per my prediction, there just doesn't seem to be an economic reason why our rates WOULD go up that far or that fast.
So there it is: 2011 will be a year in which the SA property market looks a lot like it did in 2010. A slow, steady hiss, blind delusion from sellers, no financing for buyers, and a big, ugly, pretty boring stalemate.
Most of you have already covered all the bases interest rate and price trend wise,so i have nothing to add. I was also totally off the mark when I predicted deflation based on declining electronics and import prices. General trend for anything important is obviously higher including petrol, utils and food.
As you might know I have never been that keen on buying in CT, rather looking for arable land in a rural or peri-urban area so i can persue my plans of setting up a doomstead, having a shooting range and growing cannabis in peace. This Xmas I'm visiting my mom in the Klein Karoo town of Vanwyksdorp, a dreary little burg of around 500 people and 240 alchoholics. Farms and houses around here still get advertised with multi-million ZAR pricetags but they aren't exactly moving. The advertised prices for land here are EXACTLY the same as they were when i visited last Xmas for EXACTLY the same properties and farms as last year. The notices are going yellow and are covered in dust. Ordinarily this would depress me but for the case of a local bush pub that went under auction lately. Comes with 3 hectares, borehole, dam, bar complex with braai area and abalutions. Asking price: 2.6mil. Sold for 55K. (cross my heart and hope to die)
I could be wrong but if you're looking for more out of the way land beyond the commuter belt that never actually joined the boom, now might be the time to start looking.
7 comments:
My Predictions:
Interest rates to stay even or drop in the first half, then to start rising steeply in the 2nd half. maybe 2-3% up
on the interest rate rise: panic selling like you've never seen before.
I'll go.
Scenario 1: More of the same. Banks asking 20 - 30% deposit meaning that due to the extremely low interest rates many people can afford the repayments, just not the deposit. Market dead. If banks start with their 100% or even 110% bonds again we have the foundation of a very bad crash, especially due to the low interest rates, but not before a huge upward spike. Sub-prime style. Alternatively those who can save the 200K for a deposit are usually financially intelligent, which is about 0.2% of South Africans. This means a slow dreary market, property appreciating much lower than inflation. What do the FSB bottom feeders call that? "Negative Growth"?
Scenario 2: Increase in fuel cost combined with low interest rates combined with those who are priced out of property spending their cash on cars and retail instead, resulting high inflation, reserve bank freaks out and we have a huge interest rate spike. Those who just bought property based on their affordability of the monthly repayments (99.8% of those who bought in the last 2 years) and those who maxed their credit cards or bought new cars as they became accustomed to the low interest rates will be forced to sell or repossess. The government will realize that this includes 100% of the Black Diamonds (bless their souls) and will strengthen the rights of those under debt counseling, preventing the banks and others from taking their own back, including the Cadillac with 22" rims. This causes the big 4 to get sketchy, maybe even bailouts. Capitec shares skyrocket further as China exploits the cheap labor of the previously township dwelling dude, pushing up their lending power.
Scenario 3: People get desperate. Developers that are also conveniently financial providers sell cheap white mans low cost housing with cash-backs to furnish the place (like Summer Greens, and Burgendy Estate). No transfer duty. 100% bonds at very high interest rates but who cares, we will never see 15% - 16% like before ... surely not? These look alike properties in Sunningdale, Durbanville, and Muizemberg become all the rage for FTB. The rest of the market is dead, no sellers no buyers, inflation eats away at their value.
Scenario 4: The global economy stabilizes. The Rand depreciates as the dollar / euro strengthen. SA benefits due to more exports. Many expats move back to SA along with their strong currencies. Property prices begin to rise. Banks offer 100% finance and property once again seems like a favorable investment. CT Bubble and Bean Counter become Estate Agents in Bellville.
I'll have a go, if only to see how wrong I was a year from now.
Rising fuel and food prices in the US leads to higher inflation. The Fed uses a benchmark that excludes Food & Energy (madness!), but this will have a chain reaction with regards to other good & services. Pressure grows to increase interest rates, but the Fed realises it will worsen the housing and commercial property situation even more. I.e. Ben "The Illusionist" Bernanke might actually realise he cannot have his cake and eat it too. Either maintaining low rates or raising them causes problems. Wikileaks exposes gross malfeasance in the mortgage operations of Bank of America, re-igniting public anger at the banks.
Public sector layoffs in the UK begin. The UK housing market stays flat or drops due to the layoffs and accompanying uncertainty. Positive price pressure of energy and food competes with negative pressure from job losses. The Bank of England underestimates the effect of rising commodity prices, and Mervyn has to write another letter. More protests from students and public sector workers. I leave the UK.
The cost of debt continues to rise worldwide, putting pressure on European government bond sales. Speculators take up large short positions on Portuguese and Spanish bonds. Pressure grows within Germany to not support European sovereign bailouts.
The Chinese learns a lesson on the limitations of centralised control and loses it's grip on inflation and property prices. China finally let's the renminbi appreciate to combat inflation and boost domestic consumption. It buys less European and US treasuries, making debt more expensive in the West.
Because of increasing interest rates in the rest of the world, less carry trade means a depreciating Rand, which is good news for SA exports. But fuel prices keep rising, leading for higher inflation and a moderate increase in interest rates. SA property stays stagnant, inflation eating away at value slowly but surely. The ANC suffers in the local government elections, improving opposition politics.
This blog is dead. Does that mean property is on the up?
My 2 cents:
I think it'll be a flat first half of the year with another 50 basis point cut making finance cheaper but still hard to obtain.
The 2nd half of the year will see the first rate increase albeit at a small 50 basis points trending the end of the cutting cycle.
Growth wise I think we'll stay in single digit territory with an improvement in yields due to the increase in rent.
Since I bought a flat and joined the Dark Side, my outlook has been split straight down the middle: I hope property will crash to prove me right but I pray that it won't so I can stay solvent.
However, my 2011 prediction suits both my outlooks.
I'm going to shoot for the moon and predict that 2011 is the year the Euro disintegrates as Herr and Frau Deutschland get tired of working harder and longer so that the French can work less and the Greeks not at all.
The northern European powers will quickly re-align, forming a kind of uber-Euro free of the Mediterranean muck, but until that happens - 2012? 2013? - global investors will go screaming straight for the dollar and commodities. If the US is still shaky, they'll pile into resource-rich economies even more.
We're not exactly a BRIC, but we do have yellow shiny stuff in the ground, so the Rand will stay strong, producing low interest rates (or at least stable and low-ish rates) which in turn will not light the long-awaited fire under the bums of reluctant property sellers.
I think most of us on this blog agree that the ONLY thing that can break the deadlock is a steady and meaningful rise in interest rates. The banks are not going to blink first: it is up to the home-ownerists to crack under their crippling debt. I don't know what it would take to get through the think heads of SA's home-ownerists, but I know most would rather hawk the silver and flog the kid's university tuition than miss a car repayment or lose their slavebox. We are financially retarded, utterly obsessed with new cars and horrible faux Tuscan shoeboxes, and I think even the most cynical amongst us would be amazed to see the lengths most Saffers would go to to keep their prized assets.
SO, I think we'd need a bigger interest rate shock than most countries - perhaps a 5 percent hike in under a year - to spread the kind of panic needed to get the ball rolling.
But if the Euro cracks, as per my prediction, there just doesn't seem to be an economic reason why our rates WOULD go up that far or that fast.
So there it is: 2011 will be a year in which the SA property market looks a lot like it did in 2010. A slow, steady hiss, blind delusion from sellers, no financing for buyers, and a big, ugly, pretty boring stalemate.
Yo Guys.
Most of you have already covered all the bases interest rate and price trend wise,so i have nothing to add. I was also totally off the mark when I predicted deflation based on declining electronics and import prices. General trend for anything important is obviously higher including petrol, utils and food.
As you might know I have never been that keen on buying in CT, rather looking for arable land in a rural or peri-urban area so i can persue my plans of setting up a doomstead, having a shooting range and growing cannabis in peace. This Xmas I'm visiting my mom in the Klein Karoo town of Vanwyksdorp, a dreary little burg of around 500 people and 240 alchoholics. Farms and houses around here still get advertised with multi-million ZAR pricetags but they aren't exactly moving. The advertised prices for land here are EXACTLY the same as they were when i visited last Xmas for EXACTLY the same properties and farms as last year. The notices are going yellow and are covered in dust. Ordinarily this would depress me but for the case of a local bush pub that went under auction lately. Comes with 3 hectares, borehole, dam, bar complex with braai area and abalutions. Asking price: 2.6mil. Sold for 55K. (cross my heart and hope to die)
I could be wrong but if you're looking for more out of the way land beyond the commuter belt that never actually joined the boom, now might be the time to start looking.
Happy New Year BTW!
Post a Comment