Rate caution good for rental demand
Category News
South Africa's Reserve Bank is known for its cautious approach so it is no surprise to most that it decided this week to keep interest rates unchanged.
The move followed the announcement by the US Federal Reserve that it would also keep rates at current levels for now, and the news that the inflation rate for February remained unchanged from January at 3,2%.
What is more, the Bank is clearly expecting inflation to shift up even closer to 4,5%, the midpoint of its target range, in the coming months as a result of the 13% Eskom electricity price increase that will start to take effect in April and a possible VAT increase of 0,5 percentage points.
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However, it has also revised its expected GDP growth rate down to 1,7% for 2025, which will clearly not do much to address SA's critical unemployment problem.
And from a real estate point of view this situation is likely to lower consumer and investor confidence and put a damper on home sales overall, but will also most likely increase the demand for rental properties - and the scope for rental increases if salaries continue to increase at above-inflation levels.
Author: Berry Everitt