Never heard the word?

Well, BREXIT stands for: Will Britain exit the European Union? MUNEXIT stands for: Will the ANC exit the municipalities of Tshwane, Joburg and Port Elizabeth? One, or two, or all three and/or in any significant proportions?

The lovely thing about democracy is that you don’t know. Many polls have seen the DA and the ANC neck-and-neck but, like the polls that had the world on a high 48 hours before BREXIT, they could be wrong. Then, of course, even before the result, we have the political commentators talking about who would be good bedfellows – the ANC and the EFF, the EFF and the DA or the DA and other smaller parties etc, etc. Finally, there is the talk of the smaller parties falling away from the South African political landscape as the larger parties warn voters that a vote for “small party” means they could not have enough to get into Council but the ANC could have one more proportional vote for their candidates.

Politics is not boring and one thing we know, this is the most important election since 1994 and probably the forerunner of a few “most important elections” to come. The reason? The ANC is fractured and caught between reason and the President – it’s centre, so critical to political power in any party, is cracking. No attempt to heal the rift has been successful and they are now dependent on a massive show of support in Gauteng even as I write.

On 31 December last year, Clem Sunter gave us 10 Flags to watch this year. A number have been playing out in global economics and politics. Very interesting that BREXIT wasn’t mentioned but SA Elections 2016 was. Here are the Flags and I’m sure, in no particular order of importance:

  1. The oil price [into the $30’s, back to $50 and now early $40’s [and I read to day the mega-oil companies are making mega-losses whilst the over-supply continues]
  2. Global temperatures, floods and droughts [we have not been left unscathed]
  3. The US Federal Reserve Bank [read: “US interest rates”]
  4. The Chinese economy [who could ever forget those January collapses in the Chinese stock market where falls were faster that the “close the market” stop-losses could trigger in?
  5. The war in Syria [Europe has changed for many, for ever]
  6. Vladimir Putin [“Mr Putin is a strong leader who wants to restore the superpower status”]
  7. The American presidential election [Donald is chosen but Ted Cruz won’t even endorse him and Hilary may be sanctioned before she even has a chance to run – amazing]
  8. A global pandemic [the Vika virus hasn’t just concerned the Pro golfers and antibiotics failed to heal a person in the USA this year – all’s gone very quiet]
  9. The municipal elections in South Africa [THE FULL STORY IS RETAINED, FYI]

“The results of these elections will indicate to what extent all the controversies of 2015 have affected the popularity of the ruling party and its leadership. The flag is not just about the percentage of the votes that each party receives, but the total turn-out too in terms of judging the outcome of the next general election. Meanwhile, the Rand/Dollar exchange rate remains the best indicator of the world’s take on developments in South Africa: whether we are consolidating our position in the Premier League of nations or meandering downhill into the Second Division.”

So there you have it, little ol’ SA gets into the List of 10 once again. We certainly do always box above our weight!

The one thing we cannot do is debate the stats when it comes to well-run municipalities. The DA runs the greater majority of them in the Top 10. More importantly for this blog, is what happens in well-run municipalities is that property prices rise. In fact, I would stick my neck out and say they rise at a level greater than the national rate over the long-term – that’s a dead cert in Cape Town. Probably the reason is simply that people want to live there and are prepared to “pay up” to do that.

That said, the most recent [June 2016] House Price Indices of the banks have been an interesting read:

  • According to ABSA, the Middle segment has shown the most resilient growth dropping from 6% in February to 4.9% in June 2016. Overall house price growth so far this year has been 5.7% and points to a negative growth of between 2 and 2.5% in Real house price growth for the year.
  • FNB remains quite positive. “…….little cause for concern at levels of financial stress” is the way John Loos expresses his introductory remarks in his Mortgage Barometer of 19 July 2016. However, he goes on to say that their Household Debt Service Ratio is “under pressure”.
  • Standard Bank is somewhat of an outlier but one needs to bear in mind the different ways banks measure house prices. They record house price increases at 7.3% due to the fact that credit extension by the banks remained robust for longer than expected.

A recent report from Homeloan Junction shows that volumes of Applications for bonds have remained resilient and even better than last year. That’s an excellent statistic and well done to the Team! 


So, why the interlude around the house market and its prices? People like to live in safe, clean environments. They like their kids to go to school in well-run establishments and when sick, to be cared for in sanitized, proficient hospitals. Doesn’t that sound like you and I? It’s true as well that the only way we can influence the current status of these facilities, is by using our vote. Never mind the conjecture about the ANC, the DA, the EFF and the Small parties, all we can do is put our “X” where our conscience leads us. What an act of utter individualism, what personal power with responsibility. Once every 4-5 years, we get to change the world; well, at least the one in which we live. How fascinating the process and how knife-edge it has become for some leaders!

May 3 August 2016 ushers in the local government we deserve as citizens of this beautiful, tortured country. May White and Black, Coloured and Indian, every valid citizen, go to the Polls en masse and vote with reason and conviction. No greater truth exists than that property is more valuable in well-managed municipalities. And the choice of who manages our towns and our Provinces is solelydriven by our vote.

As for the process and the outcome, we will know by next weekend how things have gone. What then follows is anybody’s guess. But, to return to Clem’s 10 Flags blog, a closing thought for you, our friends in property:

“If you are a pocket of excellence, you will thrive irrespective of how 2016 pans out and which scenario is in play. Foxes adapt and win!”

Yours in Property.



So what do we say, South Africa?

Against the backdrop of S&P’s “steady as she goes” decision, we have won a reprieve. That is until December 2016. Remember, we still have Fitch to come and if I was a rumour-monger, I would say they exited SA early this year in order to deliver bad news from afar.  But, that would be churlish as Rating agencies are particularly circumspect before they deliver judgements upon economies, especially those that result in sub-investment grade. As I recall we will have their decision within a month.

Who’ve we got to thank? Not Boland Bank but two institutions. The one is Pravin Gordhan and his Treasury team who must have done an amazing job in the past 6 months to avert a certain downgrade. Recovering from Nenegate, straight into Budget 2016/7, navigating Guptagate and all the speculation around it and then walking through the fire with the Hawks and their implication. What a feat for Treasury to whom we owe a debt of gratitude.

The other is Business. Thank goodness that in December 2015, they rallied around the change of mind about David van Rooyen and began what may prove to be the best Public Private Partnership [PPP] in our modern economic history. The teams that volunteered to work with government must have laid the ground for solid feedback on growth, labour and jobs to be positioned with S&P. Who knows but that in these early stages, we are not laying the foundation for progressive growth targets with the necessary compromise between Labour and Business so as to achieve meaningful employment in the balance of the year and beyond?

Of course, there were those of us [even me if I’m honest] that wondered if we could avoid the downgrade. On the back of Friday the 3rd’s news, many have said, “Well, we still have to get through December”. Let me tell you, if you had given me “stay as you are but prove yourself” as an outcome on Thursday, I would have taken it with both hands. We can face Fitch with new confidence and assuredness that we have the presentation, the evidence and the support to remain as is and work forward.

The great thing now is that we have a fighting chance. And we can come out on top. Many have referred to the Social Compact and this era could be the very galvanization that we need to find Government, Labour and Business around the table.

One thing we know is that we trade in Hope and its cousin, Confidence. With a market happily over 54000 and a Rand smilingly below R15, we have early stage Confidence. For you and I in the property industry, Confidence = Sales.

It’s a short, sweet note, this blog. Let’s hope Fitch is convinced we have the teams and mettle to improve and the wisdom to focus while we vote. Then they leave us “as is” to get on with being better by yearend. And with that decision made, that our market enjoys a fillip going into the 3rd quarter as we shrug off the negativity with a sense that all will be well.

Wishful thinking or Reality? Like Ford said: “If you think you can or you think you can’t, you’re right.” Let’s trust we’re going to surprise ourselves. And in any case, surprize yourself in the second half of 2016.


Yours in Property,

Jack Trevena


Can you believe it, the year is far advanced. And what a year it has been with probably the only gorilla in the national room being the arrest of our Minister of Finance. So far, everybody has confirmed it is not going to happen so let’s rest with that knowledge.

One of the reasons he would be hectic on government business is the soon-to-be rating by Standard & Poor which is due to make its decision on 3 June whether to downgrade SAInc to non-investment grade. The jury is out on what this could mean for us. For instance, PSG is buying Bonds because it believes the bond yield has discounted the likelihood of a down grade whilst RMB has surveyed it’s leading clients and decided the re-rating would not have a deleterious effect on the market. Moneyweb Today is reporting that the re-rating will have a dramatic effect on shares, quoting Standard Bank, and up to a 60% decline in value with a dragged bounce back over 12 months. Chris Hart, ex-Standard bank economist, is stating that under a particular set of circumstances, the Rand could collapse to R60:1US$. What a see-saw of opinions!

On the positive side, the SARB decision to hold rates was interesting. The view is that Inflation won’t stay out of the target band ie above 6%, for as long as expected. So they held the rate. Surprising to me as my sense is that that Rand will drop after the S&P re-rating and would have needed an interest rate hike to protect it. I still expect 2% this year and we are some 0.5% away from that point. You may recall that I called 2% against the general consensus of 1-1.5% for the year. Certainly I see the next 0.5% being inevitable. However, let me make it clear that I don’t believe the rate hikes are good for anything other than the protection and stability of the Rand. We simply cannot afford high interest and low growth but, if I was to choose between a devalued Rand and high inflation or raising interest rates, I would raise rates. Another point to remember is that S&P look for sound monetary policy and the independence of the SARB especially at these times – all of this is being demonstrated.

Assuming all the information above, where is property at?


  1. Prices continue to rise slowly but, surprisingly, real price rises around 0% are occurring. Why “surprisingly”? Well, we expected negative real growth in house prices and the figure is better than expected. Good News! What is interesting according to ABSA at end-April was that the affordable segment is performing well and pushing up the average. Their think is that down-buying [the tendency to buy a smaller house that you know you can afford] could be creating price resilience in the lower market. My sense is that government employees can afford these houses and are wanting to enter the property market.

  2. The rand is under strain whichever way you cut it. If that is so, building prices will rise and new houses will become more expensive that existing properties. That will push the price of houses in all sectors. By how much, I do not know but it is good news for ad valorem money earners like estate agents.
  3. The issue is affordability and this is driven by two things: Employment and Interest rates. Employment, whether it exists/remains and the stability around “my job” lends confidence. If rates are rising [and this must be a dead cert], I question my ability to afford a bond. The move earlier in May by the FED to hold back again on a rate increase in the USA coupled with our decision last week to hold fire is cause for positivity but we must accept rates will tend to rise – we’re in such a cycle. Rates rising has a mathematical impact on affordability but if I’m unsure about my job, I lack confidence to buy in any case. As a knock-on, that affects even my willingness to sell. The nutshell of this is that sales will be slow.

  4. The downgrade is possible and imminent. We really don’t have long to wait. I want to be with those who believe it will not occur; my heart is there. My head says it is inevitable. Unless PSG is spot-on, it will raise the cost of borrowing for government, decrease the value of shares and dent the Rand. None of this we need at a time of slow growth and drought. It will make us feel poorer before the markets rally back over a year. Let’s raise our genes of faith and trust for the best outcome for all our Peoples.

My best advice – Know what you can control and work hard at it. Rest with what you can’t control and allow things to take their course. If you really do have money to buy offshore hard currency then do so.


Yours in Property

Jack Trevena