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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2016-09-09
If you were able to predict the direction and rate of growth of new mortgage loans granted you would have a very good idea of the direction and rate of growth in the overall property market. When a time series of new mortgage loans granted is compared with a time series of the South African Reserve Bank's Leading Business Cycle Indicator, it is amazing how the leading indicator leads or points the direction of the growth in the mortgage market and therefore the overall property market. The little bit of economic good news is that the SARB Leading Business Cycle Indicator rose by +0.9% in June 2016. Although relatively small, a positive change is nonetheless good. FNB report that the support came from global economic factors with the Leading Indicator for SA's major trading partner countries contributing positively. Other positive sub-indices were the number of residential building plans passed excluding houses less than 80 sqm; the number of Job Advertisements and the growth in new passenger vehicles sold. According to the Naamsa website the August 2016 stats for new passenger vehicle sales included 7 Bentley's, 9 Maserati's, 15 Ferrari's and 93 Porsche's. The bulk of passenger vehicle trade in South Africa is done by VW with 5,964 vehicles sold in August followed closely by Toyota with 5,294 vehicles.

Despite the positive contributions, the leading economic indicator still declined for the 33rd consecutive month on a year-on-year basis. This is important as it still shows us that the overall trend has not changed and even though the rate of decline has slowed, we still require overall positive growth in the leading indicator to reverse the trend and see the real improvement in the mortgage market we are hoping for.

The silver lining for property professionals is that there is now an expectation of no further interest rate hiking as the inflationary pressures ease. It is therefore conceivable for us to experience a further improvement in the property market over the short term. Business confidence and economic growth as measured by real GDP growth also track each other in an uncanny way. Currently we seem to be experiencing a perfect storm with the media capitalizing on one political headline after another further dampening business confidence and in turn overall economic growth. This is a great time for bargain hunters in the property market to strike.

For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.

Andreas Wassenaar

Principal - Seeff Dolphin Coast

Cell: 082 837 9094

andreasw@seeff.com