2016 Feb 01 - Interest Rate Increase Detrimental to Property Market                                           Port Elizabeth Property First Article

"Property Network feels strongly that the the latest half point interest rate increase will do more damage than the good that was intended," says Colin Fibiger, CEO of Property Network.

The move was predictable considering a jump in inflation from 4.8% in November last year to 5.2% in December, as consumers battle with with rising costs of essentials such as food, fuel and energy.

"While we understand their inflation targeting, we beleive interest rates should not be viewed in isolation with the CPI but holistically within our overall economic situation'" said Fibiger. "We believe that the depressed state of our economy is the more critical issue at the moment and any increase in interest places yet another barrier on the road to growth."

"Our increases in inflation have been driven by a falling rand, poor fuel buying and management strategies, Eskom mismanagement and the overall lack of insight into the agricultural sector," he said. "These are all issues which can be addressed through responsible governance rather than playing with interest rates."

On a bond of R750 000, the hike is going to mean an additional R250 instalment per month, which might seem insignificant but for many homeowners, current and potentially, it is a make or break number for affordability amongst many other cost of living increases.

The lack of growth in the economy, conbined with investor insecurity and negativity means that SA will teeter along at 1.5% GDP growth, which in real terms means we are actually going backwards.

"This trickles through to investment markets such as property, and we believe that any positive predictions for the property market will be proven wrong," said Fibiger. "And although this creates what is popularly named a 'buyers market" , the concept holds little water if sellers are sitting put due to economic circumstances."

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