Sentiment and the Property Market (The Bugle)

Sentiment is that intangible but very powerful force that can have a significant impact on the buying decisions people make on a daily basis and on our economy as a whole. How striking miners at a platinum mine can impact the market for residential property along the Dolphin Coast, is an interesting question and may be quicker and more direct than you can imagine. 

The Lonmin owned Marikana mine strike started on 10^th August 2012 and the resultant clashes with police left 34 workers dead and extensive CNN coverage. The contagion to other platinum and gold mines resulted and even 20,000 truck drivers went on strike, resulting in fuel shortages in some parts of the country. This labour unrest has directly resulted in the downgrading of South African sovereign debt, firstly by the rating agency Moody’s and then on 12 October 2012 by Standard & Poor. The perception of political, economic and fiscal uncertainty creates this negative sentiment and impacts on the South African government’s credit profile. Moody’s also downgraded a spectrum of South African corporate investment instruments, including several South African residential mortgage-backed securities. As the risk profile of these securities increases so does the cost or interest payable on them. 

The Rand has weakened in response to the rating agency downgrades and because South Africa is a small open economy, the cost of our imports filters through into our inflation rate. The prospect of higher inflation makes the prospect of lower mortgage interest rates less likely. South African GDP growth is now expected to be no more than 2,5% for the year, significantly below the 3,2% reported at the end of last year. 

Much is happening on the political front with the lead up to the ANC’s National Conference scheduled for December 2012 at which the presidential candidate for the 2014 elections will be designated. For many there is a lot at stake. One of the great lessons we were taught as University students by our Business Finance professor, was to ask the questions as how events in one part of the country and world impact other parts. Sometimes the answers are obvious, other times less so. In financial markets information is everything and the speed at which it is processed and taken advantage of, can be the difference between profits or losses. 

As a property owner looking to sell along the Dolphin Coast my recommended response would be: (1) Is my property priced correctly? If not, review this with deeds office transfer data in one hand and advice from a property professional you trust on the other; (2) Have I presented my property in the showroom condition expected by a buyer? There is a lot of competition out there. Your home may require a little TLC to give it a lift and make it more appealing; (3) Work in partnership with your chosen estate agent – make access and viewings easy, keep the property neat and tidy, provide as much information as you can on the property; and (4) When presented with an offer, take some time to carefully consider it before responding. You will not believe how many sales are lost over small differences price.

(Author: Andreas Wassenaar, Published in The Bugle, 17Oct2012)