27 February, 2009
Statistics are dually known as useful and misleading. Another relevant saying is that a little knowledge is a dangerous thing.
CAR magazine used to have a short section covering the number of complaints received from readers separated according to car brand. The problem with that sort of analysis is that it ignores the relative number of cars from each brand on the road. The “exposure” of toyotas to problems is much higher than maseratis since there are rather more toyotas on our roads. If CAR magazine received an equal number of complaints from drivers of maseratis and toyotas, it would suggest anything but an equal likelihood of having problems from each of those brands. I obviously wasn’t sufficiently convincing when I offered to help them devise a less biased measurement criterion.
This is an example of a common problem with random events – it is important to consider what could have happened as well as what did happen when understanding the results.
In a related example, iAfrica has an interesting article on car hijackings in South Africa. They include a list of the top ten hikacked cars. The list is interesting, but difficult to interpret without knowing how many of each vehicle were hijacking AND how many were on the road, able to be hijacked. If the Maserati Gran Turismo were on the list, I would be wary of driving one! (more…)
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26 February, 2009
photo credit: johnnyalive
A reader has some news, potentially about Rudie Visagie and another Rudco-style plan. Neither I nor the reader are sure about the details yet, but the story sounds all-too-familar.
I read your article on the web when i googled Rudy Visagie.
How very interesting to note all concerns people are having about “RUDCO”.
So i guess the guy is using a different company name.
I just wanted to share with you what is happening in the area in live.
There is a company by the name of Grande Properties, owned/directed by RUDY VISAGIE. He is also offering low-cost middle class houses in Kimberley, Northern Cape. Houses range from 2-3 bedroom, fixed interest rate on 8%, 10,000k deposit for securing your plot. For a 3 bedroom you will be paying bond instalment of 2,000k fixed for 20 years at that interest rate, for a 3 bedroom at a price of 450,000k, 3,000k fixed for 20 years.
Concerns are many and most are the same as of the people in your articles, like: (more…)
Our memories are too short. It was only a few short months ago that Alan Greenspan’s legacy was being torn apart by critics of his eagerness to prop up bubbles through monetary easing. The critics said that his actions limited short term damage from the bursting of bubbles and economic difficulties only to generate the most severe crisis since the Great Depression.
Injecting liquidity, increasing the money supply, encouraging credit extension contributed to poor allocation of economic resources, a housing market bubble and a desperate search for yield through gearing and risk-taking. Many South Africa commentators were vocal in support of this view too.
But now we have forgotten. A seasonally adjusted and annualised decline in South African GDP of 1.8% has everyone begging for an emergency cut in interest rates. Early cuts before the next scheduled MPC meeting and 200 basis point cuts are suggested and encouraged. “We must save the economy, jobs are being lost!”
Bank-affiliated economic units have been particularly loud. (more…)
24 February, 2009
Skyrocketing home prices were ignored by the retired masses. With limited income and huge equity stored in their primary houses, thousands of retired home-ownders in the US and UK dipped into the equity in their houses.
Banks facilitated this through the creation of home equity release products or “reverse mortgages”. The bank lends money to the home-owner against the property as security. However, since the income of the “borrower” is limited, no interest payments are required. Instead, on death, the house is sold and the proceeds go first to repay the accumulated loan to the bank. The emotional trauma of having to sell one’s home is limited, no interest payments are required and the bank has another channel to route excess liquidity.
Bad selling practices and high effective interest rates gave these products a bad name. Sometimes the correct move, if difficult, is to downsize rather than rapidly erode the equity in a house. This tempered sales of the home equity release products that might otherwise have caused more headaches for banks given the current, twinned crises of credit and property. (more…)
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19 February, 2009
Profit margins are being squeezed by decreased spending power of consumers. That is true, but it is also not the full story. Competitive pressures, buyer and supplier power dictate sustainable margins in the medium to long term.
Fin24.com has a story this morning around Shoprite’s results and pricing strategy going forward.
The CEO of pan-African retailer Shoprite, Whitey Basson, says the company is prepared to sacrifice profits to remain “the cheapest food retailer in South Africa”.
So far that sounds right honourable, but let’s see what comes next:
“We can’t afford to let that area of our branding slip,” said Basson
Which makes sense. This is not a question of sacrificing profits to benefit struggling consumers. This is about reducing margins now in a price war with other retailers so that they maintain their strong market share and increase margins in future, leading to higher profits. Strategically accepting lower profits now for higher profits in future is smart, but it’s not about helping the consumer. (more…)
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16 February, 2009
It is entirely possible that I was too optimistic. For once. What I said was:
Our house prices will decline further but (political meltdown excepted) I’d bet serious money that we won’t see these declines in 2009 or 2010.
I was talking about the 12.4% decline in US house prices in 2008 and the areas with declines greater than 50%. Now I still don’t expect this as a most likely scenario, but a little more evidence is showing that the possibility exists.
According to Realestate web story:
- Alliance Group, who oversee distressed house sales, indicate that distressed property sales have jumped alarmingly
- The Alliance Group believes negative housing equity – where your home is worth less than you owe on it – is now most probably at 1 in 15 South African homes.
- The Alliance Group Distressed Asset Index tracks mortgage stress, which it has defined as mortgage holders who have been in arrears for two months or less. Mortgage stress has sharply increased from 75 000 in the third quarter of 2008 to 130 000 in the last quarter of the year.
According to a Business Day story:
- Relating to a particular set of auctions “Yields which were 10% last year are now 13%.�. In the absence of signficant rental increases, this implies around a 23% decline in house prices. Even with a 10% increase in rental this implies a 13% decline in house prices.
Ok, so these are just a few anecdotal stories and perspectives from a couple of market players. However, it is clear that not all is well in the property market.
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12 February, 2009
CNN has a story on house price declines being at their highest in 30 years. Turns out the headline is misleading in two ways. Firstly it proclaims house prices at a 30-year low, which is fortunately not quite the reality. However, the largest decline in 30 years is still pretty shocking. The second item is that the 12.4% decline in US house prices in 2008 is the worst since they have been systematically recorded.
Home prices fell 12.4% during 2008, the largest yearly decline since the National Association of Realtors began keeping comprehensive records in 1979.
As always, averages are a useful measure of overall market movements, but hide some truly enormous declines in individual areas: (more…)
