Whatshot
Property Talk
Property Talk
Date: 2018-03-30
Economic Insight and Analysis
The Reserve Bank of South Africa is a good source of macroeconomic data and the recently published Quarterly Economic Bulletin provides a wealth of economic insight and analysis.
The headline figures show CPI Inflation at 4% and Producer Price Inflation (PPI) at 5.1%. Keeping an eye on consumer and producer inflation rates is important for a property professional or investor as it has a direct link to our administered interest rates and through that the mortgage rates paid on the household mortgage debt.
The Reserve Bank's stated primary mandate to control inflation implies that it will use its repo interest rate to control interest rates throughout the financial markets and in turn the amount you pay monthly on your mortgage bond.
The repo rate is currently 6,75%, which is the re-purchase interest rate of the rate at which commercial banks are able to access finance from the Reserve Bank. This can be thought of as the wholesale price of money that the banks can access funds at.
The prime interest rate is currently 10,25% and this can be thought of as the retail price of money.
For a property market, interest rates are fundamental and a relatively low cost and stable interest rate environment such as what we are currently experiencing sets the platform for future growth.
Once we have a period of sustained political stability, this will translate into improved business and consumer confidence, and before you know it, the current buyers market will swing to a market favouring sellers.
This will mean firmer prices and less stock. From our perspective at the coal-face of daily property transactions it seems like buyers have enjoyed an extended run in their favour.
They have had exceptional choice and pricing that has been flat. As a small open economy where much of what we consume on an annual basis has an imported component to it, our currency exchange rate directly impacts on our cost of living.
With the Rand currently trading at R11,64 to the US Dollar, the Pound Sterling at R16,5 and the Euro at R14,41 this is a considerable improvement and positive impact on our economy. To get a superb insight into the Rand's exchange rate movement over the past 5-10 years, the website
Nevertheless a 44,67% improvement in the value of the Rand over this two year and two month period is nothing short of spectacular. Our latest GDP growth rate is recorded at an impressive 3,1%.
If there is one thing that would concern me as a student of the SA Economy it would be our stubbornly high unemployment rate of 26.7%. Of the 55m South Africans, just under 10m are employed and 5,88m are unemployed.
The unemployed are those who are willing and able but cannot find employment. Imagine 6m people and the impact they could make on our economy if they could find a way of becoming economically active.