Low CPI and GDP ‘bad for market’
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.