It’s a warm fuzzy feeling that hangs over the property sector this Christmas, thanks to our improving economy and a more stable world outlook.
As predicted the Reserve bank gave us another boost lowering interest rates again resulting in a prime rate of 9%, now the lowest interest rates we have enjoyed since December 1973 and 33.5% lower than this time 2 years ago.
If you think about it that means that if your bond cost are now only 2 thirds of what you were paying in 2008, and add to that the annual increases that would have been added to the incomes of those lucky enough to have formal employment, (even luckier if you worked for government ) and the average family should be well in the black, even with some disposable income for Christmas.
And this will filter down into the residential housing market. FNB building confidence index, shows its first signs that building activity will begin to recover later in 2011. Building recovery normally starts in the residential sector and the index shows a marked improvement ( index improved from 29 to 38 for the last quarter of 2010 )
So with all the challenges facing the residential property market the big picture looks brighter.
But for the investor it means that the window is slowly closing as improved economic conditions bring new buyers into the market, developers surplus stock gets absorbed, banks clear their portfolios of repossessed homes, and prices move upwards as price inflation kicks in, and of course interest rates generally follow the upward trend.
It certainly looks like sellers will become price makers again in the new year, so i am still of the view that its time to build your portfolio - Buy...