A year ago, saying that South Africa’s political and economic outlook was looking negative would have been an understatement – but despite all the turmoil, 2018 looks to be a year of positive changes.
Cyril Ramaphosa’s victory at the National Assembly on Thursday 15th February 2018, which saw him sworn in as the new President of South Africa, has calmed investors’ anxieties and helped to stabilise the Rand. With the postponement of the State Of The Nation (SONA) address, all eyes are currently on the Minister of Finance, Malusi Gigaba, and his scheduled Budget Speech on February 21st, 2018.
At the same time, a modest economic recovery seems to be underway, with some economists predicting growth of up to 2% in 2018. While this is far from the 5% growth rate that South Africa has been aiming for, it would be a definite improvement on last year’s economic performance.
High interest rates and a low water supply: dampers on growth?
While positive news abounds in early 2018, there are two factors that property investors should track carefully this year: the continuing water crisis in the Western Cape and the Reserve Bank’s interest rate decisions.
As far as the water crisis is concerned, a wait-and-see approach, combined with water saving strategies at the office, are the only things that property owners can do at present.
Interest rates, especially the SARB’s decision to keep the prime repo rate unchanged in January, are seen by some experts as an obstacle to strong property market growth.
While the Reserve Bank has inflation control in mind, a lower interest rate environment could compliment the current optimistic business climate and help the economy return to strong growth.
As growth returns, will the property market follow suit?
Despite the uncertainty of the past few years, Cape Town’s property market has been extremely resilient to date. The number of new developments in the city, along with the redevelopment of the eastern CBD, also bode well for the Mother City’s commercial future.
For property investors, the long-term picture in Cape Town looks stable – but what about 2018?
- In the best case scenario, “Day Zero” will extend beyond June 2018, and if the winter rains deliver enough water to raise dam levels sufficiently the crisis may be averted.
- An upbeat economy may convince the Reserve Bank to lower rates, creating a positive cycle of growth and expansion.
- Even if water rationing were to be implemented during a year of slow economic growth, chances are that the property market would see these as temporary setbacks.
Temporary problems don’t deter wise investors
Dramatic headlines aside, one thing remains certain: both rain and interest rates are bound to fall sooner or later. When they do, patient investors will almost certainly be rewarded for their confidence in the Cape Town commercial property market.
With the city remaining a firm favourite among foreign investors and South African “semigrants” alike, 2018 may be remembered as the year when Cape Town beat the drought on its journey to becoming one of Africa’s foremost tourism and commercial cities.
If you’d like to invest in Cape Town commercial property or are looking for new premises in the Mother City, contact us today. Our area specialists look forward to answering any questions you may have.