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Pest Real Estate Industry Essay Sample

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  • Pages: 4
  • Word count: 969
  • Rewriting Possibility: 99% (excellent)
  • Category: loans

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Introduction of TOPIC

POLITICAL
Not only does South African politics influence the real estate market but neighbouring countries’ political situation can easily spill over into SA. In recent history stats have shown that the number of sellers selling due to emigration has doubled and this is mostly due to political instability. Zimbabwe has for long had political problems and this directly influences any potential investments both locally and internationally, says Craig Hutchison chief executive officer of Engel & Völkers Southern Africa. Hutchison says South Africa has never lagged behind any country when it comes to political turmoil. This political situation has influenced everyone and almost everything in the country, so how has it and will it influence the real estate market.

In recent history stats have shown that the number of sellers selling due to emigration has doubled and this is mostly due to political instability. Factors that are also indirectly influenced by politics are things like rising inflation due to global food and oil prices which diminishes monthly disposable income. This all leads to a rising household debt-to-disposable-income ratio, he says. Even though we have seen some ups and downs in the real estate market during the years since the first democratic elections, the future still looks bright.

ECONOMIC
Not all is bad in the economic sector and many opportunities have opened up. Firstly the prime interest rate has been reduced by 5.5% since the property boom. This has been very positive for both existing homeowners and those wanting to get into the market for the first time. Although financial institutions no longer offer interest rates on residential property below the prime rate, the vast reduction has ultimately still led to the general monthly bond repayment being lower than those seen during the boom. Homeowners who bought a home for R1 million during the boom at an interest rate of 14% over a 20 loan period, were paying around R12 435.21 per month on their bond. With the reduction in the interest rate, those same homeowners are currently paying around R8 678.23, which translated to a saving of R3 756.98 per month, R45 083.76 per year and a

massive R901 675.20 over the term of the loan – a total saving that is over 90% of the initial

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purchase price of their property.

With the majority of South Africans loan dependant when it comes to purchasing property, any fluctuation in the interest rate will have an impact on the housing market and buyers levels of affordability. Most potential buyers will require finance from the bank if they want to purchase a house this means that they will be affected by the interest rate in someway.

SOCIAL
The Department of Human Settlements determines finances, promotes, communicates and monitors the implementation of housing and sanitation programmes in South Africa.

Government has set itself the target of making a positive impact on the quality of life of 500 000 households by 2014, by upgrading informal settlements. The upgrade will provide households with security of tenure and access to essential services in sites that are close to economic and other social amenities.

To meet its objective of sustainable human settlements and improved quality of household life, the Department of Human Settlements has identified the following areas of priority:

•Accelerated delivery of housing opportunities
•Access to basic services
•More efficient land use
•An improved property market.
Between 1994 and June 2011, government built over three million homes for South Africans, giving shelter to over 13 million people.

TECHNOLOGY
If only 18% of South Africans own a computer then how come one in three has access to the Internet? This is because many people can now activate the internet through their mobile phones allowing people to search for properties anywhere in the world of these Internet-savvy South Africans, three-quarters are signed up to at least one social media network – like Facebook, Twitter, Mxit and LinkedIn – making these networks significantly more popular than email, which comes in at 66%.

And the role our online social life is playing in our daily life is growing space, particularly in South Africa’s favourite places – our shopping malls – which are the most frequently visited public spaces in the country. Legislative

Struggling South African consumers, especially homeowners have been urged by major SA banks to take advantage of low interest rates to accelerate their debt repayment. Reserve Bank Governor, Gill Marcus said that the prime lending rate would remain unchanged at 8.5%, a decision met with very little surprise by those within the real estate sector. The governor said the committee continued to assess the monetary policy stance to be appropriately accommodative, given the persistence of the negative output gap.

On inflation, the bank’s forecast showed a slight deterioration in the inflation outlook for 2013 compared to the previous forecast. The forecasts incorporate, among others, the lower electricity price increase of 8% that the National Energy Regulator of SA granted power utility Eskom. Eskom had sought a total 16% tariff increase. Inflation is now expected to average 5.9% in 2013 and 5.3% in 2014, compared to the previous forecasts of 5.8% and 5.2%. However, inflation is expected to temporarily breach the upper end of the bank’s target range (of between 3% and 6%) in the third quarter of 2013 when it is expected to average 6.3% and then moderate to 5.2% in the fourth quarter.

Marcus said the deterioration was largely due to the depreciation of the rand and higher petrol prices, which more than offset the impact of lower electricity prices. Core inflation is expected to peak at 5.1% in the second quarter of 2014.

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