Property Talk

A week ago I was admiring the surprising downward trend of the US Dollar to Rand exchange rate (i.e. strengthening of the Rand) since the spike recorded in January 2016. I am sure other South Africans engaged with importing goods had also been watching this trend with a sense of encouragement.

And then it happened - a textbook political shock to the system that has immediate and far-reaching consequences. Few expected it. The recalling of the finance minister and his deputy from their overseas investment roadshow and the firing of them and a handful of other ministers has created extreme uncertainty in the mind of business owners, investment analysts and property investors.

The reversal of the strengthening trend of the US Dollar:Rand exchange rate happens with almost unbelievable speed as thousands of people dump Rands in favour of Dollars in a vote of no confidence. I remember our Economics professor equating South Africa's Rand exchange rate to the US Dollar as similar to the country's share price and the collective view of investors of the future economic growth prospects.

The impact of these recent events on property transactions are real and often measured in the lost or delayed opportunities as people hold back on their investment commitments until the dust has settled and more certainty returns. As a South African we have been exposed to this type of uncertainty so often we are able to deal with it relatively easily. I often wonder how people in first world countries would react if faced with similar circumstances.

The sky would be falling on their heads. It is this resilience that South Africans exert that remains a great strength. I agree, it is not good news when the leading media channels brand a country's president as rogue and out of control. It does however provide opportunities if we are convinced of the longer term stability and prosperity of the country - which I do subscribe to.

Some good news is that the recent data released by FNB showing their March 2017 House Price Index showed a definite acceleration from 2,7% in February to 4,1% in March 2017. If we adjust house prices for CPI inflation, FNB's figures show that house prices are still in negative territory in real terms but are definitely on the up.

Since December 2015 the average real house price has declined by -4,6% year-on-year, and we are still -22,2% below the all-time high reached in December 2007. Not that we would expect to go back to those levels in real terms, even ten years later.

If month-on-month house price figures are considered then the improvement experienced over the past three months is far more pronounced and encouraging. As described in the FNB report, the SARB Leading Business Indicator is pointing upwards, the Barclays Manufacturing Purchasing Managers Index (an excellent guide for short term economic direction) is showing that we are heading towards expansion, commodity prices are stronger and in many places of the country - notably the Free-State and KZN the drought conditions have been alleviated (excluding the Western Cape of-course). These are all very positive aspects and should provide encouragement.

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