Property Talk

Dig deep and ensure our delivery is better than ever

Last week the SA Reserve Bank Monetary Policy Committee met to consider the local and global macro-economic environment and use their policy interest rate called the repo rate to influence interest rates and therefore the cost of money in our economy.

As a property professional this is important as the cost of money drives demand for property in our economy. Our macro-economic snapshot shows CPI inflation at 4,3% and PPI inflation at 4,9%.

With very little pressure from producer prices, we can expect consumer prices to remain stable. The prime interest rate is 10%. Banks access money from the Reserve Bank at the Repo Rate which is currently 6,5%.

This is their wholesale rate or price of money and they then retail it to you and I at Prime. The 3,5% spread is where their profit lies in the business of lending money.

Our Rand Dollar Rate is hovering just under R15. Over the last two months since the last meeting of the MPC the Rand has depreciated by 4,6% against the US Dollar and by 3% against the Euro.

Not so great if you are in Japan supporting the Boks in their World Cup campaign, or if you are selling a local mansion in order to buy a small apartment in Sydney.

So are there any silver linings out there for us to hang on to The Reserve Bank decided to keep the repo rate unchanged which at least means no increase in rates.

GDP growth rebounded to +3,1% in the second quarter following the shocking -3,1% decline in the first quarter which saved us from being thrust into a technical recession defined as two consecutive quarters of contracting GDP growth.

The current forecast for average GDP growth for 2019 is 0,6%. Beyond this the forecasts grow to 1,5% and 1,8% for 2020 and 2021. At this stage relatively uncertain as so much can change.

For South Africans GDP growth of below 3% is simply not good enough and fails to generate meaningful activity in a struggling economy. It is therefore no wonder that the RMB/BER Business

Confidence Index fell to a low of 21 (from 28) and why our leading business cycle indicator is trending lower. The MPC have succeeded in their stated goal of price stability.

Economic growth however remains elusive and something all South African business people are hoping for. Global GDP is expected the average 3,2% in 2019 and rise to 3,5% in 2020. Imagine if we could simply be average on this measure! With the prospects of slowing GDP growth in the US the risk to SA is significant.

Burning oil fields in Saudi as a result of a drone strike from Yemen are definitely not what we want to see as big importers of oil. As a small open economy South Africa is vulnerable to external economic shocks and these curved balls can derail the best of business plans.

For those of us in the service industry it is time to dig deep and ensure our delivery is better than ever and than we add value with every engagement. The sales in most industries are still going to happen in one form or another - your challenge is to ensure you do a share of that.