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GDP growth good news for SA's property market

09 Sep 2019

Positive news to emerge from Statistics SA is that South Africa's Gross Domestic Product (GDP) grew 3.1% in the second quarter of 2019 (to end-June), compared to a decline of 3.1% in the first quarter.

This means that the country has avoided a technical recession, which is defined by two consecutive quarters of negative growth. Carl Coetzee, the new CEO of national bond originator BetterBond, says it also means that South Africa now has a slightly better chance of avoiding a sovereign debt rating downgrade when Moody's reviews the economy in November.

Moody's is the only one of the top three agencies to still award SA an investment-grade rating, and losing that would be an automatic signal for institutional investors to withdraw billions of rands from SA markets.

"On the local front, news of the GDP turnaround is likely to improve economic confidence and bolster a domestic spending increase that has resulted from the slight decline in interest rates in July. And that is excellent news for the property industry, which is very dependent on positive sentiment," says Coetzee.

As it is, he says, the StatsSA figures show that the finance, real estate and business services sector grew 4.1% in the second quarter, and was the second-biggest contributor to overall GDP growth. The biggest was the mining sector, which grew a whopping 14.4% thanks to the cessation of several strikes and big increases in precious metal prices.

"What is more, we have already seen the property market continuing to grow in the third quarter and are confident that it will improve further in the coming summer sales season, because owning a home is still a major aspiration for a large percentage of SA's population," says Coetzee.

"To illustrate this, the latest available Reserve Bank figures show a year-on-year increase in outstanding household mortgage balances of 4.6% at the end of July. In addition, the latest BetterBond statistics show a year-on-year increase of 5.2% in the number of home loan applications received at the end of August, and a 14.7% increase in the number of applications that were approved by the banks."

Article published courtesy of Property24

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