Decrease in interest rate good for real estate

Private Property South Africa
Adrian Goslett

While it is anticipated that interest rates will increase in early 2011, the fact that the Reserve Bank announced a 50 basis point cut in the interest rate from 10,5% to 10% bodes well for the future of the real estate market.

There has been a noticeable increase in activity in the property market across the country as the effects of the recession slowly start to ease and appetite for property ownership returns. Added to this is the fact that South Africa's consumer inflation slowed back into the 3% to 6% percent target range last month, which may even signal the potential for a further interest rate cut later in the year, rather than an increase as anticipated. Furthermore, the Rand Merchant Bank and Bureau of Economic Research Business Confidence Index (BCI) indicated a leap of 15 points to a level of 43 during the first quarter of 2010. This was the single biggest increase between two consecutive quarters in 16 years. Also, at 43 the BCI was back to the same level which prevailed before the global financial market crisis erupted around 18 months ago. All these fact and figures are positive indicators that 2010 is indeed the year of opportunity, and that property will continue to be a solidly performing asset over the long term.

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