KEY IM­PACTS ON PROP­ERTY MAR­KET

Weekend Argus (Sunday Edition) - - METRO -

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.

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