Economy could grow by 2% as 2018 kicks off on a positive note

As we welcome everyone back from their annual break to the world of property, we do so in a much better mood than last year. We kick off the year with more positive sentiment following the appointment of Cyril Ramaphosa as President of the ANC and President in waiting of SA.

Effects of the positivity is already to be seen in the strengthening of the currency. While junk status is still with us, there are plenty of reasons to feel cautiously optimistic about the year ahead. These include the announcement of the appointment of an Inquiry into State Capture which has been much anticipated and will go a long way to boosting investor confidence.

The JSE stock exchange ended 2017 on a good note having performed well above expectation. Add to that, the petrol price drop and potential interest rate cuts which will be good news for consumers and the property market.

The biggest challenge for the Cape metro, is the persistent drought and everyone is urged to save water where they can. If you do not already know, we are now in Level 6 water restrictions. Visit the City of Cape Town website for more information and tips on how you can help save water.

Insofar as the property market performance is concerned, the latest FNB House Price Index reports an overall strengthening in the house price growth last year. The growth rate improved from a low of 1.5% year-on-year in December 2016 to 6.1% for December 2017 which even surpassed FNB’s predicted rate of 5.5%.

The bank also believes that after three years of slowing annual average house price growth, 2018 could see a stronger growth rate of close to 5%, notably better than the 2017 average of 3.7%. This is naturally highly dependent on political stability and economic growth.

The early part of the year is usually a more positive phase for the property sector and we believe that the above factors are all good for the economy and property market. In addition to more activity in the sales and rental sectors, we would also urge sectional title schemes to use this time to undertake maintenance projects ahead of the winter rain season.

The February budget will be one to watch as it is widely expected that there will be higher costs for consumers including potential tax hikes.

Finance Minister, Malusi Gigaba said in a recent media statement that the economy could grow by 2% this year if the government takes needed policy decisions. Measures highlighted by international credit ratings firms would suggest that this would include dealing with state-owned companies and fiscal consolidations.

A combination of higher commodity prices due to stronger global demand along with rebounds in local agriculture, mining and manufacturing have also been cited by economists as potentially boosting economic growth in 2018.

While the economic constraints remain for the time being, we are at least buoyed by a better outlook for 2018.