For the sixth consecutive time, the South African Reserve Bank has announced no change to the repo rate, maintaining its multi-decade low of 3.5%. This comes on the back of stronger-than-expected economic growth in the first quarter of 2021, but disappointing recovery in industrial sectors due to ongoing electricity supply issues and recent riot activity.
“As long as the economy remains under this level of pressure, it makes sense for the SARB to support investment through accommodative interest rates,” says Tony Clarke, MD of the Rawson Property Group. “It’s possible that inflation could trigger an interest rate increase in the near future, but realistically, I don’t see this happening before the middle of next year.”
For the South African property market, this means the exceptional buying conditions experienced over the last year will likely be staying put for some time.
“It’s not just low interest rates making this a good time to buy, either,” says Clarke. “There are some extraordinary bargains coming onto the market in the form of distressed properties as well. It’s a sad commentary on the financial pressures on consumers, but we know of at least one bank whose distressed portfolio has literally doubled in recent months. They’re offering preferential interest rates to qualified buyers to help move these properties faster, making them extremely attractive investment opportunities for those in the know.”
As for sellers, Clarke says competition is high, but favourable sales are still happening – as long as properties are priced and marketed strategically.
“Buyers are bullish, but they’re not about to spend more of their hard-earned money than necessary,” he says. “Listings need to demonstrate a clear value proposition. Those that do are selling faster and for far better prices than properties that miss the mark on their positioning.”
It is a different scene for the South African rental market however. The rental market has experienced a serious oversupply of properties during the pandemic. This, says Jacqui Savage, National Rentals Manager for the Rawson Property Group, is due to a combination of factors reducing the number of willing and able tenants.
“On the one hand, we have tenants taking advantage of the low interest rates to buy instead of rent,” says Savage. “On the other, we have tenants under extreme financial pressure because of the pandemic who are looking to cut costs wherever they can. As a result, the pool of qualified tenants on the market has been shrinking, and landlords are having to accept far lower rentals to avoid expensive vacancies.”
Successfully navigating these conditions has become a time-consuming and delicate task, with properties taking up to two months to tenant successfully in certain circumstances. Here, Savage says the skill and expertise of experienced rental agents is paying tangible dividends in the form of faster results, more reliable placements, and less contentious lease negotiations.
“The key at the moment is to minimise short term losses while safeguarding long-term growth and rental asset value,” she says. “That’s a whole lot easier to do with the strategic support of an experienced, tech-enabled agent who can avoid current pitfalls while preparing for future opportunities.”
Despite South Africa’s uncertain economic outlook, both Clarke and Savage say property remains a safe long-term bet.
“Historically, property is one of the most secure and stable investments to have in times of upheaval,” says Clarke. “We have every reason to believe it will continue to prove its value as we overcome the latest challenges to our country’s economic recovery.”