Referring to a recent report from John Loos of FNB, where Loos talks about the Rand weakness’s impact on residential property, Shiraaz Hassan, commercial director for Asrin Property Developers, says, “We need to take a serious look at why the Rand is losing value, why there is such a large budget deficit, and these issues need to be addressed.”
Loos’ report says “the Rand is seen as the country’s “share price”, and thus often causes a deterioration in sentiment, it is possible that this general sentiment deterioration can cause a more cautious residential property investment approach” and “A weaker Rand potentially exerts upward pressure on domestic inflation via the prices of imports. Given the SARB’s 3-6% consumer inflation target, this may have implications for interest rates, and speculation of earlier-than-previously expected interest rate hiking has indeed arisen as a result.”
“Which, as we see, is what has now happened,” said Hassan. “The recent 50 basis point interest rate hike is sure to be followed by two or three increases throughout this year, which will put pressure on the local property market. We have only just started coming out of the slump of the last few years and if buyers are deterred by the possibility of not being able to afford their mortgage loans, this could have a crippling effect on the residential property market.”
The labour unrest in the mining sector this country is a deterrent to outside investors, says Hassan, and this also has had a marked impact on the country’s mineral resource exports as well, prolonged strikes widen the budget deficit and an upward adjustment of interest rates is by no means a remedy. South Africa needs to get exports up in order to operate at an efficient level and focus on reducing the 25% unemployment rate, he says.
“The labour unrest in SA is destructive and the direct consequences are interest rate hikes and higher tax burdens, the lower bracket income earner feel the pinch of this most of all,” he said.
The private sector is not growing at the rate anticipated and many companies have not been able to create the jobs envisaged, said Hassan.
“While we at Asrin are not politicians, growing and maintaining our business is important. To be able to continue building and producing homes effectively, labour issues need to be addressed and taken control of. Balance needs to be restored in terms of employment opportunities created. For every 100 units built, there are an approximate 300 new employment opportunities created. We feel we are doing our bit but pragmatism on our government’s part is needed. High wage demands are often not sustainable in the current market and if many labourers here would compare themselves to their Chinese or Brazilian counterparts, they might realise that they should be happy with doing their job and not striking to gain better salary packages. South Africa needs to become a producing country rather than a demanding one,” he said.