The widely held opinion that South Africas interest rates will be held at their current low levels for most of 2011 could be proved wrong soon, says Tony Clarke, MD of Rawson Properties '“ and the cause of the change, he says, will be the floods which have hit agriculture in eight of South Africas nine provinces.
Some 3% of South Africas gross domestic product is, said Clarke, generated by the agricultural, fishing and forestry sector and the country is a major producer of maize, soya beans, wheat, fruit and wine, all of which have at some point been affected by the floods.
'This means that by the middle of 2011 the country will be short of these products which, in turn, will lead to price rises and a general increase in inflation. Inevitably then the SA Reserve Bank will counter this by raising its rates.
'We will see at least a 50 to100 base points rise in the rate before year end 2011,' said Clarke.
South Africans, he said should take cognisance of this now adjust their budgets and ensure that they are in a position to service and maintain their bonds, treating this as their number one priority in their budgeting '“ and initiating higher monthly payments now before they become obligatory.
Among those who are paying off homes, he added, there is a tendency to extend the loan as long as possible rather than to shrink it. This, in his view, is because they see certain extras and luxuries as essential to their lifestyles when they could easily do without them.
'HP on cars is all too often a prime reason for a lack of savings. Some young people on double incomes today would rather spend ± R5 500 per month to buy a new R270 000 2000 cc car than to buy a smaller 1300 or 1400 cc hatchback for ±R1 500 per month less'
This mindset, said Clarke, has become so widespread in the last few years that there are many couples with no savings at all.
In the Rawson group, said Clarke, those estate agents who have established themselves as trustworthy financial advisors to clients (and helped to draw up realistic budgets) have been highly successful and often turned clients into lifelong friends.
'The ability to provide this extra service will undoubtedly become more important. Let us hope that saving regains its appeal for South Africans'
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
