Mixed outlook for real estate in wake of S&P downgrade

Cape Town - From a real estate point of view, SA's downgrade by ratings agency S&P on Friday will likely cause a drop in housing demand within the next few months, according to Shaun Rademeyer, CEO of bond originator BetterBond.

In his view this will be due to falling employment prospects and rising living costs that make it more difficult, especially for first-time buyers, to qualify for home loans.

“We could also see a simultaneous increase rise in the number of existing home owners and investors who are no longer able to afford their properties and are seeking to sell them in order to avoid repossession," said Rademeyer.

"And, depending on how great the imbalance between supply and demand becomes, we could see property values actually start to decline.”

However, Rademeyer added that, although many consumers will be in for a tough time next year, there will be opportunities, especially in property.

“For example, the demand for rental properties is likely to spike in the downgrade scenario, and those who are able to acquire such properties now for cash or with large deposits are set to do very well out of their investments in the longer-term," said Rademeyer.
 
“Those who can move fast to sell their existing properties and realise the equity that they have built up in these homes will also be in a position to upgrade to bigger and better homes they will be able to purchase at a significant discount to market value – although they will need to check first that they will qualify for a new loan.”
 
Meanwhile, those who have saved and planned to become home owners should proceed without delay, in his view., while interest rates and the income qualification levels for home loans are still at relatively low levels.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
15.30
-0.3%
Rand - Pound
20.62
-0.1%
Rand - Euro
17.31
-0.1%
Rand - Aus dollar
10.91
-0.1%
Rand - Yen
0.13
-0.5%
Gold
1,842.36
-0.0%
Silver
23.81
-0.7%
Palladium
2,145.00
-0.1%
Platinum
1,023.00
-1.0%
Brent Crude
86.27
-1.9%
Top 40
65,653
0.0%
All Share
72,164
0.0%
Resource 10
71,479
0.0%
Industrial 25
90,959
0.0%
Financial 15
14,713
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot