By Xolile Bhengu

Tough times are anticipated in the property sector from another interest rate increase this month , which Reserve Bank Governor Tito Mboweni said may be 2percent.

In the past few months the property market has been struggling with increased interest rates affecting affordability of property, building material increases, and over-supply shortages delaying developments.

Property experts said they expected a cooling of new developments, but expected existing developments would do well as rental demand increased.

The South African Property Owners Association said the reports of the South African Reserve Bank possibly introducing a further interest rate hike would negatively affect the ability for new developments to be built in the residential, commercial and industrial sector, as investors tightened their belts.

Sapoa chief executive officer Neil Gopal said property stalwarts with experience of local property volatility would ride the storm of the market cooling.

He said investors who had been players only in the past three to four years would face a down cycle as operation costs increased. He said in the past two to three year issues of shortages of building supplies had eased, and increased costs of building materials remained.

“The interest rate increase is going to put smaller construction companies out of business.”

The Master Builders Association of South Africa agreed that building costs were high. MBASA executive director Colin de Kock said steel prices had reached phenomenal high s in the first half of this year, and were estimated to cost 60percent more than last year.

Source: Sunday Times