select
|

Benign inflation and interest rate environment positive for home ownership

While generally anticipated by commentators in the market, the decision by the Monetary Policy Committee meeting (29 January 2015) to hold the repo rate steady at 5.75 percent is most welcome - particularly at a time when as a nation we are coping with ongoing power cuts which impact negatively on businesses and individuals alike, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
 
“The recent collapse in energy prices is a potential significant game-changer in 2015. Locally, the widely held premise going into the new-year was that growth would strengthen and that the SA Reserve Bank would raise interest rates to contain inflation and to normalise interest rates – especially as the US began raising interest rates. This would be necessary to protect the Rand.
 
“However, with the collapse in oil prices, inflation is much less of a threat globally and locally. In the US, the Fed may be able to delay much anticipated interest rate hikes from mid-year to later in 2015. In Japan and Europe, which are fighting off deflation, monetary policy is now like to be eased further. In South Africa, with inflation surprising on the downside, and with the Fed now likely to delay the first rate hike, the Reserve Bank is now likely to delay the next interest rate hike till later in the year or possibly even until 2016.”
 
Dr Golding says lower inflation and a delay in the timing of the next interest rate hikes is obviously good news for the local residential property market. In recent years, growth in house prices has outstripped growth in personal disposable income – resulting in a modest deterioration of housing affordability. Lower inflation and a subdued interest rate cycle will bolster household disposable income, helping to offset this deterioration to some extent.
 
“However, the benefits of the more benign inflation and interest rate environment may not be enough to positively impact the economic growth outlook. While the slump in oil prices benefits us by reducing the cost of imports, the simultaneous decline in other commodity prices is hurting our exports. And a substantial trade deficit makes the Rand vulnerable to further bouts of weakness.
 
“In addition to a tepid global growth environment – hence the weak commodity prices – South Africa faces additional local headwinds including load shedding, the prospect of further labour instability and infrastructure bottlenecks. As a result, growth is not expected to exceed 2.5 percent this year.
 
“Until such time as the economy is growing at a more robust growth rate, and is generating significant new employment opportunities, the local residential housing market is unlikely to enjoy more than at best low double digit growth in prices. What the property market needs is a return to the pre-recession growth rates of 5 percent to 6 percent accompanied by strong employment creation and healthy growth in salaries and wages.”
 
Concludes Dr Golding: “From a Pam Golding Properties perspective 2015 has kicked off with high market activity and a continuance of high demand and stock shortages in sought after nodes and areas - further boosted by the return of investors and growing interest from commuters. We are also seeing the increasing importance of first-time buyers seeking to gain a foothold in the market and acquire their own homes. Coupled with this, after a protracted slump, building activity has recovered and we are likely to start seeing more stock come onto the market – including units in new developments.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    • 15 Feb 2018
      One positive consequence of the financial crash in 2008 was the rise in consumerism, especially in the property market, where buyers have steadily become more knowledgeable and more value conscious.
    • 15 Feb 2018
      While most homeowners will take the agent’s commission into consideration when they are trying to determine what the will get out from the sale of their property, many often forget to factor in the other costs involved in a home sale, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 14 Feb 2018
      The forecast for the national rental market in 2018 remains a mixed bag of good news and bad news. Although rentals are expected to rise slowly as the challenges of home affordability and tighter lending criteria tighten their grip, it’s a double-edged sword as the market also will come under increasing pressure from factors like declining disposable income levels.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK