Property Talk

Good News: The key repo rate unchanged

The South African Reserve Bank provides us with up to date Consumer Price Inflation (CPI) and Producer Price Inflation (PPI) information, the latest being CPI quoted at 5.3%, firmly within the 3-6% target range and PPI at 4.6%, which being below the CPI indicates the trend expectations of CPI. The Reserve Bank Monetary Policy Committee decided to keep the key repo rate unchanged at 7% on 25th May.

This means that the prime rate quoted by the main commercial banks remains unchanged at 10.5% and your mortgage rate remains unchanged for now. CPI is of particular interest to property professionals as the Reserve Banks' primary mandate is inflation targeting by using its policy repo rate to effectively set the level of interest rates in the economy. With the property market so dependent on debt finance, any changes in the cost of money has a direct and immediate impact on the demand for residential homes.

Stats SA provides great information on the way in which CPI is calculated. Recently changes to the basket of goods and services that make of the CPI were announced and provide interesting insight into how the consumer spending patterns have changed over the last four years. Did you know that there are 412 products and services in the new basket - up from 396. Basically Stats SA use consumer research information to identify the most appropriate goods and services South African households spend their money on.

The basket is updated every four years to keep within the five-year norm of international best practice.

Examples of the products that have been removed from the basket are blank CD's and DVD's as well as pre-recorded DVD's showing how things of changed in the way we consume media and store data. Other items that have been removed are postage stamps (who uses the post office anymore, right ), tennis balls, teapots, electric fans, automated pool cleaners, sweet corn, tinned peas, spreads (such as Marmite and Bovril) and board games to name a few.

The type of new additions to our basket include frozen convenience foods, instant noodles and ready-mix flour (indicating a population with increasingly less time allocated to preparing meals), savoury rusks and biscuits. Sectional title levies have been included given the shift to more people living within sectional schemes. Other additions include video games, car rental, car wash services, peanuts, pears, chewing gum, toasters, coffee mugs, toy cars and diesel.

The 412 goods and services in the basket are classified into 12 broad groups, such as food and non-alcoholic beverages, clothing & footwear, health, transport and education.

Despite the bank's domestic growth outlook deteriorating and being adjusted downwards to 1%, 1.5% and 1.7% for 2017 to 2019 respectively, there are some positive signs being lower oil prices, moderating domestic electricity tariff increases, an improved agricultural outlook and lower food price inflation.

The semi-gration of people from Gauteng to the Western Cape and to Ballito, to a lesser extent, are driving demand for rentals and residential properties within these areas.