Does the interest rate cut matter for the South African property market ?

Posted by Viruly Consulting on Thursday, September 9, 2010

It is unlikely that the decision by the South African Reserve bank  to lower the repo rate by 50 basis point will have a significant  impact on the South African commercial property sector. Recent residential property data provided by ABSA and FNB suggest that the rise  in residential values has stalled and that  the sector  could  be  experience a double dip.The  commercial property sector continues to suffer from high vacancy rates, and  property owners are finding it difficult to secure rental increases that surpass the inflation rate. The recently published  3.7% inflation rate  will have played a role in the reserve's bank decision, yet there is growing evidence that operating costs in the commercial sector are growing at a rate well in excess  of this figure.  This will continue to place negative pressure on net rentals and property values.  It is unlikely that the sector will  , in the medium term,  see  a significant further lowering  in interest rates. For now,  prospects for the South African Property sector will largely be determined by whether investors will be sensitive to lower interest rates. 

Francois Viruly
Viruly Consulting