Bill Rawson, Chairman of the Rawson Property Group has, as he has done on many occasions, when reviewing the interest rate scenarios at that time, warned that any further drop in the gross domestic product growth rate or failure to reduce the high current loan deficit could lead to a further downgrading of South Africa’s economic prospects by the international rating agencies – with negative effects for the economy in general and for the property sector in particular.
Both Fitch and Standard & Poor’s have now downgraded South Africa’s economic rating. The latest downgrade by Standard and Poor’s has seen them calculate South Africa’s GDP growth for this year at 1,7% (0,2% below their previous calculations) and 3% for next year. They have re-rated South Africa from BBB (stable negative) to BBB- (stable negative watch). This rating is below that of both Moody’s and Fitch.
“It is clear that an immediate response from the state, in particular the implementation of the National Development Plan, is now absolutely essential,” said Rawson. “If I read the situation correctly right now there is, as yet, relatively little chance of South Africa’s bond trade being affected, but, as regards the rest of the economy, remedial action is now essential. A return to South Africa’s previous rating is, I believe, possible within six months now that the mine strike situation is at last being brought to conclusion.”
“The house price growth this year has been acceptable. At ± 8% the market has regained a great deal of its confidence. It would be a pity if the current momentum and the increasing desire for home ownership in the emerging middle class fell away due to negative international perception — but this will happen if the next rating is not more positive.”
