Volatile Global Markets Could Threaten Local Property Market

We’ve all been watching, with interest, the recent developments in China.  China-800x601The Chinese stock markets crashed by 8.6% this Monday, and the repercussions were felt around the world.  Other Asian markets, the Australian Market, and the markets in Europe and the USA followed suit.

At the time of writing this it remains to be seen if this crash is something that the global markets will contain.  Whilst we are hopeful that this is something recoverable in the short term, it is very possible that the impact will be significant, and could trigger a global financial crisis.

The last time we were in this position back in 2007 / 2008, there were consequences that impacted us all. It would be prudent for us to be aware of the possible scenarios that could play out, and take steps to minimize the impact on our businesses and our families.

When the Rand has crashed in the past, the Reserve Bank increased interest rates in order to prop up the currency.  It seems almost impossible to avoid a similar reaction now, given that the Rand is at all-time lows’.

That means the cost of servicing our debt will increase.  So be cautious when incurring debt, including home loan finance, and make sure you can handle an interest rate increase of more than a few basis points.

Sellers need to consider that, with buyer affordability being impacted, it is very likely the property market will slow down.  The governments and the banks have learnt a lot from 2008 – so it’s unlikely there will be the fallout we saw 7 years ago.  But it’s highly probable that the banks will have less of an appetite for home loans and will proceed with caution to limit their risk.  This will impact property values, as all markets work on supply and demand.

That being the case, if you are selling your property, it would be wise to take current market feedback from your estate agent into consideration and ensure you are correctly listed.  In a changing market it is those who respond quickly who achieve the best result.1.6_Glassglobe

The global nature of the worlds’ economies results in everyone being impacted by something that happens on the other side of the world.  The speed of the impact is what can be alarming and catch us off guard.

So be prepared for some uncertainty.  Budget accordingly.  Don’t panic, but be sensible.  If you want to sell in the short term then be smart and sell quickly.  A fair price in a stable market is a good result in uncertain times.

In all markets there are great opportunities.  The important thing is to stay alert, keep appraised of market conditions, and make informed decisions.  Work with your agent to achieve the result you desire – but be swift about reacting to market conditions.  Volatile environments call for calm heads and clear action.  Hopefully sanity will prevail on the global markets.

Steve Caradoc-Davies

Principal of Harcourts Platinum
Director of Harcourts South Africa

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