Moody's decision a boon for real estate

South Africa’s real estate market will benefit from the decision by Moody’s rating agency last week to keep SA’s sovereign debt rating above junk – not least because it will further boost the rand and put more money in consumer pockets.

So says Berry Everitt, CEO of the Chas Everitt International property group, who notes: “This decision means that SA has, for now, avoided exclusion from the Citi World Government Bond Index, which would have triggered an automatic sell-off of SA bonds by investment fund managers around the world, and the withdrawal of billions of rands from our economy.

“What is more, the decision highlights several positives that should give both local and foreign investors even more confidence going forward, including the higher-than-expected economic growth that SA has been achieving under its new political leadership since the start of the year and the new regime’s demonstrable commitment to cleaning up corruption and restoring stability and transparency in Treasury, SARS and State-owned enterprises like Eskom, Transnet and SAA.”

As a result of these factors, he says, Moody’s has changed its outlook on SA from negative to stable, which is a rare move and indicative of the confidence the agency has that SA will be able to deliver on its promises of structural as well as cyclical improvements in economic growth and that will lead to substantial job creation.

“This would of course automatically boost demand for both rental and owned housing, but even in the shorter term it will give real estate a boost by making home ownership more affordable. When investment flows into the country instead of out, the Rand strengthens and helps to keep inflation down, which means the Reserve Bank can lower interest rates – which it is widely expected it to do later this week.

“That is of course helpful to those who already own homes, as it lowers their minimum monthly bond repayments, but it also makes it easier for prospective buyers to qualify for home loans and afford the monthly repayments. And this, along with the improved sentiment among consumers, will undoubtedly release pent-up demand and boost property sales at all price levels in the coming months.

“In short, this is a great outcome for SA real estate, which was facing a bleak future at this time last year, and we are happily anticipating really significant growth in the sector over the next 12 to 18 months.”

ISSUED BY CHAS EVERITT INTERNATIONAL

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BERRY EVERITT ON

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