Interest rates remain unchanged

The recent decision by the Reserve Bank’s Monetary Policy Committee to keep the interest rates unchanged was a disappointment to the residential property sector, says Tony Clarke, Managing Director of Rawson Properties.

“We have,” he said, “been through two months in which, as a result of the widely praised handling of the World Cup and the commendable holdback on radical statements by the ANC Youth League and the xenophobic elements trying to make life difficult for work seekers from other African countries, investment confidence has risen quite noticeably.

“In the property sector we had hoped that a further 0,5% drop in the interest rates, coming on top of these positive factors, would give a further boost which would enliven the whole market. This is now unlikely to happen”

It has to be recognised, said Clarke, that although South Africa managed to “dodge most of the fatal bullets from the European recession” a second European downturn is now becoming increasingly likely.

“Until recently many of the economic indicators were fairly positive,” said Clarke, “but there are now signs that the European recovery will continue indefinitely. I am inclined to agree with those economists who are predicting a see-saw economy for the next 12 to 18 months and this will inevitably affect South Africa’s chances of a speedy recovery.”

Gill Marcus and her team, said Clarke, are politically strong enough to lead a breakaway from the traditional conservative policies of the South African Reserve Bank - but clearly are not yet ready to do this.

“Their decision to leave things as they are ignores the many statements from reputable analysts that the South African economy does now need real stimulation - especially in this post World Cup period in which the provincial and national governments are facing the reality that we spent a great deal more money than we can initially recoup to achieve the World Cup success - and both our parastatals and our private sector will now pass on to the consumer increased charges to reduce debt.”

Clarke said current massive unemployment, satisfactory inflation rate forecast and the lack of bank finance for new projects, in his opinion, should have made it advisable to reduce the interest rates.

“The question we should ask the MP’s is “Why wait for the economy to stall before cutting the rate?””

“The sad truth,” he said, “is that many businesses are not going forward: they are either in a holding pattern or, in a minority of cases, on the point of closure.”

This, he added, very definitely does not apply to Rawson Properties, which is still on track to establish 90 new franchises this year.

“All in all, we must now conclude that sticking to the old monetary policies has resulted in the property sector - and the economy in general - being held back at a time when they needed a boost and part of the tragedy of this situation is that no improvement in the very high unemployment rates is likely to follow. With almost 30% of potentially active South Africans still out of a job and often without housing and sufficient food there is still a great deal that needs improvement.”

Article from: www.rawsonproperties.com