While the implication of the December CPI inflation data on interest rates is probably the most talked about, its implications for the housing market are broader than that. The CPI picture at present is mildly negative for the Residential Buying Market, but may be pointing to small signs of improvement in the Residential Rental market. The higher inflation rate of the poor remains a concern from a “social instability” point of view.
Yesterday’s release of the December Consumer Price Index (CPI) inflation rate had, as always, implications for the housing market. The widely publicized year-on-year Headline CPI inflation rate rose from a previous month’s 4.8% to 5.2% in December.
Whilst this rise is not extreme yet, it keeps the expectation that the Reserve Bank will continue to gradually raise interest rates, and a further 25 basis point rise in its policy Repo Rate is anticipated at next weeks’ Monetary Policy Committee (MPC) Meeting, to lift the Repo Rate to 6.5% and Prime Rate to 10%. That is the most obvious implication for the highly credit-driven housing market, and is expected to further cool growth in residential buying demand.
