What a Moody's downgrade will mean for SA Property
The decision by international ratings agency Moody’s to place South Africa’s Baa2 bond and issuer ratings on review for downgrade has serious consequences on the short- to medium-term property market. “If South Africa gets downgraded it will be one notch away from junk status and this is not a positon we want to be in,” says Richard Gray, Harcourts Africa Chief Executive Officer.
“If this indeed does happen the immediate repercussions will see the rand grow weaker as investors and lenders pull out of South Africa,” he says. “Many foreign investors are only mandated by their backers and funders to lend in certain markets and a downgrade may trigger a significant number of these mandates to force them to withdraw the investment.”
He says positive sentiment in our economy assures foreign investors that their investments are stable and that growth is a probability, but as soon as international ratings agencies lose confidence in SA’s forecast so too do global investors.
Gauteng's five hottest property buying zones revealed
By all accounts, the next two years are going to be challenging ones for the residential property market - thanks to rising interest rates and slow economic growth.
However, David Jacobs, Regional Manager for the Rawson Property Group's Northern and KZN regions, says there will always be “hotspots” where both sales and prices continue to rise - even in difficult times - and there are several of these currently spread across Gauteng.
“What is more, it is becoming increasingly clear that the sustained demand in such areas is generally driven by a few factors that they have in common and that relate to three big lifestyle trends,” says Jacobs.
Factor in future interest rate hikes
Today the South African Reserve Bank will announce its decision on interest rates and the possibility of a hike is on the cards, not a welcome thought for homeowners. If rates don't go up today, analysts agree that further hikes will most certainly happen this year.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, believes there is little doubt that consumers can expect a further interest rate hike at this month’s Monetary Policy Committee meeting. "This is not the first interest rate hike that consumers have had to face this year - and it won’t be the last either."
In fact, he says that financial institutions are expecting the prime lending rate to increase by a minimum of around 2% over the next two years.
Working from home? Homeowner tax deductions explained
As another financial year draws to a close, taxpayers will be getting their affairs in order and getting ready to submit their tax returns. Many will be assessing their financial situation and looking at the tax deductions that they will be able to claim back from the Receiver of Revenue.
This is according to Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, who says when it comes to tax deductions, a taxpayer is entitled to their claim, however the onus falls on them to prove that a particular amount is deductible, as well as justify the claim by showing the calculation of how they arrived at the deduction figure.
Goslett says that although many homeowners will qualify for a tax deduction, it is sometimes a difficult task for them to establish the amount of interest on their bond that is tax deductible.
Why sell or buy a home with a warranty?
It’s hard to remember a time when you bought a car without a warranty. While a car makes up a significant portion of any household’s expenses, a home is for most people the largest purchase they will make. And yet homes are bought without warranties according to Lee-Ann Dobrescu, Head of Group Business Development at Hollard, who says you might think that the law protects the buyer from a seller’s failure to disclose defects, but enforcing your legal rights is expensive and time-consuming.
For a new homeowner, she says time and money are the two things that will be in scarce supply when the roof is leaking and the trusses are giving in.
Even if you can prove to a court that the seller knew or should have known about the defect, the harsh reality is that the seller might not have the cash to meet their liability.
How to achieve your homeownership goal in tougher times
With 2016 predicted to be a financially tough year, those who have aspirations to get into the property market will need to take stock of their financial position and assess whether they are on the right track to achieve their goal according to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, who says the expected interest rate hikes, along with the rising price of electricity and food will place further pressure on potential home buyers this year. Added to this, financial institutions have already started to increase the cost of lending and reduce their risk by increasing the percentage of deposits required by bond applicants. “With the more stringent requirements that are being introduced by banks, it is becoming increasingly important for would-be homeowners to prepare financially and increase their affordability ratio as much as possible. This can be done by reducing debt levels where possible and putting money aside in an interest-bearing savings account.”