Low GDP growth rate and low inflation

Inflation is a factor which, it has been shown time and again, invariably boosts residential property prices - and the news that South Africa's inflation rate is down to 3,2% is, therefore, not altogether welcome to the property sector, even though it shows how effective the country's austerity and credit control measures have been.

This was said recently by Bill Rawson, Chairman of Rawson Properties.

Equally bad news for the property market, he said, is that year-on-year GDP growth is now down to a dismal 2,6%, 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 trade 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 rate hits 5% or higher."

The low GDP growth, said Rawson, is the bad news. The good news, he added, is that bond finance is now becoming more readily available, both to private investors and to developers. In his view, therefore, South Africa will not experience the almost stagnant property trading conditions of the 1970s and early 1980s when the only bonds granted were to those capable of laying out a 25% or bigger deposit.

"The mere fact that certain real estate marketing groups, including our own, had a very satisfactory, and in some cases record, month in October and appear to be doing well in November indicates that although the market is not as exciting as we would like a steady but slow improvement is taking place."

Article by: www.rawsonproperties.com