South African Property Prices Face Deflation In 2016


Residential Property market in South Africa would be facing price deflation due to the fall of the rand and rising concerns about economic growth.

Consumers have been warned by analysts and economists to see to ways they can cut their expenses to the nearest minimum this year especially as the rand continues to be hit down against the dollar.

According to property analyst John Loos, residential properties will face a sizable redress in the next years. “This means you can have nominal house price growth but it’s below CPI inflation, or below general inflation of the country and that translates into a price correction.” he said.

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As the rand slumped to a level of R17,99 against the US dollar, house prices are also set to slide, with the outlook for residential properties and mortgage markets deteriorating compared to last year.

Loos added that whether this would go into full nominal price decline will depend on how bad the economy gets. “If we get a severe recession, then we might get to a stage of all out price decline. We’re not in good shape at the moment and the housing market is by and large about the economy.” he said.

Central Bank Deputy Governor Daniel Mminele said that the weak rand together with the severe drought in South Africa has greatly influenced the inflation outlook in the country and have further complicated monetary policy.

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Speaking further in a  speech made in London and later posted on the bank’s website, Mminele said despite weak growth and the lack of demand pressures, inflation remains high, partly due to a rigid labour market.

Analyzing the cause of the fall of the rand, Fatima Bhoola attributed it to many structural problems facing the local economy ranging from the country’s flexible exchange rate regime, which is determined by the market forces of supply and demand, the domestic interest rate, current account deficit, political instability and poor economic performance among others.

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