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Silver linings

Pam Golding Properties shares insights and upsides to be found in these unpredictable times, read futher to find out more.

While the lockdown enforced by the South African President and government has dramatically changed the lives and lifestyles of South Africans, time has proven that as a united country, and within our local communities, SA has the ability to harness its spirit of resilience and overcome challenges and hardships.

From a residential property market perspective, historically, recent international experience reveals that global economic shocks of this nature inevitably cause property transactions to taper off, as other priorities take over.

However, within the property industry, and despite the lockdown, the rapid adoption of new technology is delivering the benefits of ensuring that the industry is already geared to largely operate and transact electronically.

“With advances in technology, and across various platforms, Pam Golding Properties has built up its electronic capabilities and communications to the extent that at this difficult time, we remain fully operational. It’s just our location that has changed, as our sales and letting agents and staff have already been working remotely for some time, backed up by personal telephone calls and electronic communications,” says Andrew Golding.

The fact that interest rates are close to historic lows following last week’s 100bps reduction in the repo rate, with the possibility of additional reductions in the months ahead, presents an opportunity for buyers, particularly in the price band below R3 million where there remains a strong demand for accommodation to buy and rent. This is coupled with the benefit for buyers of properties valued up to R1 million, where no transfer duty is payable, plus anticipated further reductions in the interest rate during the course of the year. And, being a buyers’ market, currently there is a good selection of properties across all price ranges available to view on-line and electronically via our agents.

Notably, there have only been two previous occasions since 1970 when the prime interest rate has been cut this low.

Prime was at 8.5% between July 2012 and December 2013 and was below current levels in the early 1970s. However, real prime interest rates reveal that there is still room for further reductions.

This is because, when adjusting for inflation, it is evident that real interest rates remain fairly high by historical standards. As March 2020 inflation has not yet been released, the most recent figure available is for February (ie before the recent 100bps rate cut), when real prime interest rates were at 5.15%. Double digit inflation from the mid-1970s until the early 1990s saw real rates drop into negative territory on several occasions during this period.

With the extreme volatility currently being experienced in global stock markets, it is probable that, as has been seen over decades during times of great turmoil, Pam Golding Properties believes we will see increased confidence among investors and home buyers in bricks and mortar as a resilient and solid asset class.

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