South African property owners have been anticipating a rate cut for the last 2 or 3 quarters but the Reserve bank has kept rates steady for some time now. Lets put this into perspective, rates are at their lowest level in over 36 years, we in South Africa last saw rates at these levels in 1974 and it is the after effects of the economic crisis that has left many home owners wondering if the house they bought was in fact a good investment having seen little growth in demand for residential property.

In May 2010 the average house price growth across the spectrum was around 10% with the biggest showing being residential properties at lower end of the market. Growth of over 30% has been seen in small home under 140 sqm with a steady demand. This is very good news indicating that banks are beginning to lend a little more freely in the lower end of the market while lending in the upper end or tradionally more indebted remains very stringent.

Most economists are forecasting rates to remain flat for the rest of the year with single digit growth in residential property price growth.

Most are expecting the success of the World Cup to have an impact on property prices in South Africa and with the rand at it’s current low levels, this may take a little longer than expected to materialize. Having said that, most visitors to the World cup have yet to return and we can expect tourism figures over the next 3 years to increase significantly and only then perhaps see the interest in residential property by foreigners to be a significant contributor. Those that have never been to South Africa before will visit a number of times before spending their money on South African property and of course we must not forget that the entire world has been suffering from the economic crisis, making their priorities to deal with any financial issues at home.

What we can expect is to see interest from foreign buyers in the very high end of the market, of which Cape Town can expect to see the bulk of those investments.

If you are considering buying, you may wish to read our article the costs involved in buying a home.