Demand for South African property up as rate cuts kick in

Oct 5, 2009 11:25 PM | By Zweli Mokgata, Sunday Times

There has been a rapid increase in demand for residential property in the third quarter of 2009, according to FNB's Property Barometer.

The indicator, which measures feedback from estate agents on a scale from 1 to 10, revealed that the positive impact of interest rate cuts since December has fed through to consumer demand for property.

After a slow rise from a historic low of 4.1 in the third quarter of 2008 to 4.79 by the second quarter of 2009, the third quarter of this year moved into positive territory at 5.65.

John Loos, FNB property strategist, said: "Year-on-year activity levels rose for the second successive quarter in the second quarter of 2009. One needs to be cautious when viewing the data, as seasonal factors can play a role.

"But after seeing negative growth rate on a year-on-year basis for eight consecutive quarters up until the first quarter of 2009, the second quarter saw the rate of change turning positive to the tune of 8.4%," he said.

He said the household sector debt-service ratio (cost of interest plus capital payments on household debt as a percentage of household income) had declined significantly in the first two quarters of 2009.

In Absa's third-quarter housing review released earlier this month, Jacques du Toit said the South African economy was still in a recession after contracting by 1.8% in the fourth quarter of last year and by 6.4% in the first quarter of this year.

He forecast that real GDP is expected to shrink by 1.9% by the end of the year and job losses will lead to a 2.6% this year.

Go to www.ipsinvest.com for South African opportunities.