Low CPI and GDP ‘bad for mar­ket’

Weekend Argus (Saturday Edition) - - PROPERTY -

IN­FLA­TION in­vari­ably boosts res­i­den­tial prop­erty prices, so the news that South Africa’s in­fla­tion rate is down to 3.2 per­cent is not that wel­come to the prop­erty sec­tor, says Bill Raw­son of Raw­son Prop­er­ties.

This is so even though it shows how ef­fec­tive the coun­try’s aus­ter­ity and credit con­trol mea­sures have been.

Equally bad news for the prop­erty mar­ket, he says, is that year-on-year GDP growth is now down to a dis­mal 2.6 per­cent – less than half that of the av­er­age for Africa as a whole.

“Many eco­nomic com­men­ta­tors blame the strong rand, which has limited our abil­ity to ex­port, and the unions who ini­ti­ated strikes and achieved high wage in­creases at a time when South Africa can­not af­ford them. What­ever the rea­sons for the poor GDP per­for­mance, it can be pre­dicted with a fair amount of cer­tainty that prop­erty will not flour­ish un­til we see a faster-grow­ing econ­omy. A fur­ther prop­erty boom is likely to be held back un­til the growth r at e h i t s f ive p e rc e n t o r higher.” Raw­son says the low GDP growth is the bad news; the good news, how­ever, is that bond fi­nance is now be­com­ing more read­ily avail­able to pri­vate in­vestors and de­vel­op­ers.

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