The devastating drought and depreciating rand are twin terrors for the residential property market, especially for homes in lower income communities.

The drought will cause food prices to surge, especially since replacement imported products will have to be paid for with our weak currency. Higher food prices will mean lower disposable incomes for buyers, reducing the probability of obtaining bond finance from banks. Higher prices will also push up inflation which, together with the woes of the currency, may very likely lead to an increase in interest rates in South Africa – further reducing the likelihood of people qualifying for bonds and putting additional financial pressure on existing homeowners.

Usually lower-priced homes tend to be financed more with debt than higher-priced homes so the impact of higher interest rates will be more for the former.

In the short term we expect the property market in smaller farming towns to be affected first because these towns rely heavily on agricultural production to drive their economies.

We have already seen that the poor economy and loss of confidence in the country’s leadership have resulted in buyers becoming far more wary about committing to buy a property, and this trend is likely to continue.

We are however also seeing many more sellers choosing low commission estate agents because of the money they can save compared to traditional estate agents. This extra disposable income from the savings in commission is particularly welcome in these uncertain economic conditions.

Statement issued by
David de Waal (CA(SA))
CEO Steeple – The Low Commission Estate Agents

 

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