KEY IMPACTS ON PROPERTY MARKET
JOHN Loos, economist at FNB says the potential key impacts of the decision on the Property Market as are follows:
Confidence levels will deteriorate. Although one 25 basis point rate hike makes little difference in rand terms, it comes at a bad time given that the country is into the 7th year of broad economic stagnation, and the property market has been gradually feeling increased pressure. The rate hike is thus likely to contribute the Property Market correction continuing.
The All Commercial Property Vacancy Rate is likely to continue to rise in the near term.
Commercial Capitalisation rates are expected to rise in the near term. The rising government debt-to-GDP Ratio, with expectation of further short-term rate increases next year, is expected to gradually drive long bond yields higher, while rising vacancy rates should also play a role in taking Cap Rates higher.
The rate hike decision, in the weak economic environment, is likely to keep property values declining in “real” terms, “real” referring to property price growth adjusted for general economy-wide inflation.
Although financial stress levels appear relatively low still, there has been a recent mild increase observed, and this is expected to continue subsequent to the rate hike decision.