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Letter from the editor WE HAVE changed the headlines on our property stories numerous times today. I felt they were too negative, that there had to be hope for our readers, who are probably struggling with the reality of what living through a pandemic means. But, no matter how we tried to change them so they were potentially lighter, the fact is that things are tough for many of us. I realise we cannot escape this reality, whether it is witnessing the people we love struggling with ill health, or facing death, or the financial losses and dramatic changes in lifestyle that are affecting many. Holding on to the roof over our heads has also become harder than many of us could have anticipated. But experts are encouraging and tell us not to give up. In our advice piece they offer savvy and unique ways in which to save your cents to ensure you can continue being a homeowner. Other experts even suggest turning your hobby into a side hustle to bring in extra cash. And there are some green shoots – low interest rates have meant more people have been able to own a home; we are also seeing more women become homeowners and South Africans’ sense of ubuntu has seen people opening their homes to relatives and friends in dire straits. Tough times are also the mother of all inventions and we are already seeing some phenomenal ideas of what homeownership of the future could look like. For instance, the Australian app Mortgage Mates – pretty much like the dating app Tinder – helps you find the perfect partner with whom to buy a home. We are also seeing a move to small, self-sufficient communities and homesteads. Another green shoot is how environmentally aware developers are becoming and how green buildings are now the norm. And let’s not forget about the revolutionary idea of buying a home via tokenisation. Yes, times may be tough but if, like me, you have lived more than 20 summers, you will know by now that things don’t stay one way forever. Warm regards
Vivian Warby vivian.warby@inl.co.za
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The pandemic, unrest and the weak economy mean things will not be easy – but at least interest rates are still low BY BONNY FOURIE bronwyn.fourie@inl.co.za Widespread wage restraint is putting pressure on household finances. PICTURE: MIKHAIL NILOV/PEXELS
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OUTH AFRICANS are in for a tough couple of years as they contend not only with a global pandemic, economic weakness and social unrest, but a rising cost of living that is spiralling out of control for many families. The only real saving grace is the low interest rate. Property rates and taxes have increased, as have fuel and utility tariffs, outweighing most salary increases – for those who have been fortunate to receive them. Many families are, instead, facing reduced salaries and even complete loss of income. And this, says Craig Mott, Rawson Property Group’s sales manager in the Western Cape, can have knock-on effects on people’s lifestyles and mental health. “Not having enough money to get through a full month can be really worrying for any individual.” Residents in the main three metros will see the following increases for the 2021/2022 year:
P R O P E R T Y R AT E S : Cape Town Joburg eThekwini
4.5% 2% 4.9%
E L E C T R I C I T Y: Cape Town Joburg eThekwini
13.48% 14.59% 14.59%
W AT E R A N D S A N I TAT I O N : Cape Town Joburg: eThekwini:
5% 6.8% 8.5%
R E F U S E R E M O VA L :
@property360.co.za
Cape Town: Joburg: eThekwini:
@property360.co.za
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Hang in there…
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A U G U S T
3.5% 4.3% 4.9%
More concerning, however, is that these municipal increases will be higher next year. FNB economist Koketso Mano says price inflation for the next year is actually lower than the previous year, with average metro and rates increases declining from nearly 6% in 2020/2021, to 5.6% in 2021/2022. “This lower inflation will be supported by lower property rates, which are in the region of 3.5%.” However, inflation is expected to rise towards the longer-term average of close to 9% between July 2022 and June 2023, driven by pressure on water availability. “Municipal electricity tariffs should be hiked by 14.5% this year (metro average), following a 6.2% average over the July 2020 to June 2021 period. Further pressure is expected in July 2022 as the National Energy Regulator of SA continues to liquidate the court rulings in favour of Eskom’s disputed Regulatory Clearing Account decisions. “The speed at which these get passed onto the consumer will be better understood early next year.” Fortunately, Mano says, petrol prices should moderate going into next year as Opec+ oil producers phase out oil production limits and alleviate pressure on global Brent crude oil prices. “These declining petrol prices mean that fuel price inflation will fall considerably during 2022, reducing pressure on household finances. “Food and non-alcoholic beverages inflation should also moderate in 2022, falling from current highs of over 6% to average just below 4.5% in 2022 – supported by abundant supplies in domestic agricultural markets.”
This alleviation in cost-push price pressures, coupled with subdued demand-driven inflation, should assist in mitigating rising utility inflation, he adds. Geoffrey Lee, Absa’s managing executive for home loans, retail and business banking, says widespread wage restraint in the economy, which constrains disposable income, is putting pressure on household finances. In addition, there are unlikely to be sustainable “big improvements” in household disposable income without stronger employment growth. “To this end, consumers will undoubtedly remain under financial pressure. “Covid-19 and the devastating scenes of recent unrest and violence in parts of South Africa, including the vandalising of infrastructure, have added to this financial pressure.” However, interest rates are expected to remain low for a while, although the South African Reserve Bank will have to start removing the current “highly accommodative monetary policy stance” as the economic recovery gains traction. Absa Research forecasts an increase of 75 basis points in the repo rate next year. “Against this background, mortgage affordability for most borrowers has been significantly enhanced through the current low interest cycle. In essence, the large reduction in interest rates has stimulated the demand for housing by making repayments more affordable... “More importantly, this has helped a much greater number of customers with continued affordability when it comes to
servicing their loans (despite pressure on income during the pandemic).” Still, Lee acknowledges that there is “no one-size-fits-all approach” when it comes to consumers’ unique financial situations, and while most customers who were on Absa’s Payment Relief Programme have made a full recovery, its arrears levels have “undoubtedly increased where our customers have been permanently affected by the pandemic’s effect on the economy”. “The reality is that the Covid19 pandemic and the recent unrest in South Africa have had profound financial consequences for many. And while the reduction of rates has provided a much-needed boost for the market, we may not see the same level of activity continue sustainably if this is not supported by economic growth.” Mott says people need to “make every rand count in their favour”, and that includes re-looking at household budgets, cutting back on non-essential items and using household items sparingly. Non-essential spending, he says, includes take-away foods, cellphone upgrades and any service that one is paying for but has not used in two or three months. “Owning a property comes with maintenance requirements. Set out a plan for the maintenance and attend to the items that are the most necessary without ignoring issues that may end up costing you more down the line.” Mott adds that, in attempts to cover expenses, many people are turning to communal living and opting to share spaces with family or friends.
DISCLAIMER: The publisher and editor of this magazine give no warranties, guarantees or assurances and make no representations regarding any goods or services advertised within this edition. Copyright ANA Publishing. All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from ANA Publishing. The publishers are not responsible for any unsolicited material. Publisher Vasantha Angamuthu vasantha@africannewsagency Executive Editor Property Vivian Warby vivian.warby@inl.co.za Features Writer Property Bonny Fourie bronwyn.fourie@inl.co.za Design Kim Stone kim.stone@inl.co.za
