EVERYWHERE

EVERYWHERE

News is everywhere at the moment. When I worked, I read a lot but in a very restricted sense: Business, Banking and Academics. It was more than enough to be conversant and skilled.

Now, I read on two or three platforms and then try to piece together some coherent trend that may be of interest to you. It needs to be positive as far as possible but also informative and at least from a property perspective, assist you given that your busy days may not permit that much reading.

So let’s kick off…

Bloomberg is telling us that the JSE is set to come good this year, even outperforming other markets. That’s amazing news especially seeing that the stock market has moved sideways for the last 5 years. As a general rule, [read: balanced funds] the market has been very close to static whilst the S&P has super-performed at about 30% growth including the Nasdaq, in 2019. The latter is already up 7.26% year-to-date and February is yet a pup. Did you miss the boom in USA stocks – no pity here, join the club ☺ As regards the JSE which has been outperformed even by Cash fully taxed, I have no idea where Bloomberg is coming from. I understand that shares are looking decidedly under-valued, but I thought that that was because we’re almost in recession. I really hope they’re right and the JSE flies; nothing like the national feeling of wealth to promote that invisible gem: consumer confidence.

Then Corona. The name on every TV screen and normally limited to SciFi. Superbugs are no joke. Saturday recorded the highest number of deaths at 89, bringing the total to 811. Last I heard, about 30000 people are affected which has probably increased since then. The best advice I’ve read is forget facemasks, wash your hands frequently and don’t touch your face.

That said, cities in lockdown have the feel of Bruce Willis in Armageddon movies; quite eerie and surreal. Very frightening for those trapped and hugely inconvenient for cruise ships and aeroplanes. But beyond our creature comforts, trade is shutting down as countries prohibit cross-border travel and the movement of goods. Frankly, if Corona was in Cambodia or the likes, it would have about as much impact on global trade as an outbreak of Ebola in Mali. But China, that’s another story; a huge trading story. I thought Shares would be more rattled but not so thus far. So let’s hope they are able to contain it and treat it to insignificance for everyones’ sake.

Fresh from Sydney this morning on WhatsApp…”Looks like SA, UK and Australia all had terrific storms. We had a year’s rain over the weekend.” “Shew! Fires out? I replied, and “Yep, well doused” was the answer. That’s stunning so now the animals can begin to get cared for. One thing I think I’ve mentioned before, last year’s 18000Ha fire though Bettys Bay has stimulated a massive repair and construction project in the area to rebuild properties. I think Australia has 2000 houses destroyed so the same will happen there.

The Rand is the cheapest currency in the world. That’s according to the Big Mac Index. So, all you McDonalds burger-loving people, go home this evening with a Family Pack; according to the world-famous Index, you’re eating cheaply. But what is interesting is how Oil has declined and we’re enjoying a welcomed respite in Fuel prices despite the Rand moving from R13.80 in late-December to R15 recently. I see Iran is now mothballing some Oil fields in order to stimulate the global price of Oil so probably expect a rise in price next month.

The Bank Rate is decreasing, and I remain surprised as I said last time. But it’s good news and 0.5% starts to be meaningful in most households. On a R1m bond, that’s R400 per month less. Point for me is not the saving for clients used to paying about R8775 per month but for those who are battling to pay it’s welcome relief. The other sector positively affected are those First-time homebuyers who are considering entering the market. Right now, they’re a big part of what’s moving and encouraging them is very positive for the industry.

Eskom is load shedding… De Ruyter has his job cut out but at least he’s keen and has moved on the divisionalisation of the mammoth structure to make it more manageable.

On Wednesday I’ve been invited to The Marine, one of our 5-star hotels, to hear Dr Andrew Golding. Very exciting for the sleepy coastal town of Hermanus and we’ll get to eat free canapes with the Jones ☺. I’ve asked my neighbour, one of the most successful estate agents who invited me, to ask him to give us his opinions on EWC. Right now, that stands for: Eish We’re Contracting but it seems the President is intent on forging ahead. The very fact that he’s doing that in concert with implementing other Nasrec 2017 resolutions in order to maintain his support in the ANC, is symbolic of the potential downside.

I am sensitised to the need for redistribution of land, however, was seemingly lulled into thinking that the land would be dormant and unused and that anyone who queried the decision to get Nothing for it had recourse to the Courts. But now there is a real concern that residential property is incorporated in the definition by default and that the State may have the say. It’s speculation right now as the deadline for commentary has been extended [Have you given input to the government?] to end-February 2020 but given the trust deficit between this government and its citizens, there’s no smoke without a fire.

Sadly, as much as the incumbent President may give reassurances to us, even Mcabesi Jonas in his book, After Dawn: Hope After State Capture, states that an ANC about to lose the next election may have the need to accelerate “structural reform” for votes. That is deeply concerning in my humble opinion. “Watch this space!”, as the President was wont to say in his early days. Dr Andrew’s comments will be very interesting…he’s an outstanding person.

By the way, if you’re economically minded, you will really enjoy Mcebisi’s book. He is obviously a huge asset to the country and his Foreword by Cyril Ramaphosa is heart-warming. His opening sentence is, “In October 2015, the Gupta brothers offered me the position of minister of finance in exchange for R600 million.” Thank you for saying, “No!”

So, let’s quote the man who is still the political head of Eskom, and “join the dots.” Looking at the above, so much is happening in the world and in our country. What we have mentioned is snippets of your daily macro- and micro-environments. Yet you and I labour in the overdose of news and find our optimism often despite it. There is one thing though with which I’d like to close this blog today and it comes from January’s Standard Bank House Price Index. I love it and I close with it and a few comments:

January house prices post 5.5%
But, sustained real house price growth still some way off

  • Nominal house prices growth, per our inhouse Standard Bank House Price Index (HPI), increased to 5.5% y/y in January, from a marginally downwardly revised 4.3% (previously 4.4% y/y) in December. The January HPI grew 1.0% m/m, after growth of 0.9% m/m in December, the first time since October 2018 that nominal house price growth has recorded more than 5% y/y. In 2019, house prices growth averaged 4.0% y/y, slightly below average headline consumer inflation of 4.1% y/y.

Outlook and implications

  • This may be the start of sustained momentum. Indeed, residential mortgage advances have supported house price growth, having averaged 4.8% y/y in 2019, from 3.5% y/y in 2018. The cumulative 50 bps rate cut since July 2019 and prospects of further easing should keep supporting nominal house price growth.
  • Nevertheless, house price real growth still seems some way off given that both lenders and borrowers remain cautious amid sustained economic fundamental weakness along with highly uncertain economic conditions. Specifically, both consumer and business confidence remain depressed, with all SA consumers remaining pessimistic about future economic performance. And, the country is on the brink of being downgraded by Moody’s to non-investment grade, which will lead to SA falling out of the WGBI, and power cuts will persist for at least the next 18 months. Even the expected global growth recovery now faces new downside risks such as the as yet unknown outcome of the coronavirus outbreak.

HPI in detail

  • Sectional title property price growth rose further to 7.2% y/y in January, from 6.0% y/y in December. Sectional title property prices growth had bottomed at 0.6% y/y in April 2019 but recently surpassed growth in freehold property prices. In contrast, growth in freehold property prices slowed to 5.7% y/y in January, from 5.8% y/y in December, having peaked at 11.7% y/y in January 2019.
  • Gauteng property prices accelerated to 6.8% y/y in January, from 5.5% y/y in December; Western Cape grew 3.0% y/y from just 0.3% y/y in December. KwaZulu-Natal property prices moderated to 7.7% y/y, from 9.4% y/y in December.

So, despite the lapse into negativity on the third bullet, here is what I garner from this research:

  1. Gauteng growth in HPI is starting to move and eclipses Western Cape by more than double. I’ve been calling that for years and I’m so glad for you guys. Long may it last!
  2. Security remains paramount as the sectional title continues to fly. I think First-timers are in there as well and many prices are in the “moving” range, say, <R2.5m.
  3. 5.5% growth is a real increase of 1.2% with this quarter’s inflation forecast at 4.3%. Little in the scheme of things but I’ll take real growth in house prices any month; so would you.

But the statement that got me going was this: “This may be the start of sustained momentum.” You see, when Standard Bank says that’s a possibility, I sit up and listen. They then go on to ground that in mortgage advances growth so it’s not a wish-list, its concomitant with the readiness of the banks to lend and the affordability of clients to borrow. I say again, I love that. And again, long may it last despite the current “everywhere” headwinds.

Lift your heads. In all of the news, there are snippets of information that portend some growth. How or where, I’m not debating but that there are many positives, I’m putting it out there. Think about it.

Yours in Property.

Jack Trevena

Jack Trevena

With over 30 years of experience in the banking and home loan industry, my hope it is share what I have learnt over the years with my blogging community, inspire conversation around the subject and in the process discover unique insights into this ever changing environment.
Jack Trevena

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