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Oil, food key to SA property market - expert

Dec 01 2014 12:22

Johannesburg - Global oil and food markets have been key to South Africa's residential property market performance, according to First National Bank's property barometer released on Monday.

"For those linked to the residential market in some way, therefore, the reports of a current oil 'glut' should perhaps be a cause for happiness," FNB household and property sector strategist John Loos said in a statement.

The drop in the oil price had been linked to increased global investment post 2008 which increased global energy production capacity.

Strong supply capacity had reduced the risk of a 2008-style oil price spike.

This, along with global food prices and the rand both "playing the game", contributed to the FNB expectation for consumer price inflation (CPI) slowing in 2015 to 5.2% from an expected 6.1% average for this year, Loos said.

"Slower consumer price inflation would also be a boost for household disposable income growth in real terms, which drives the purchasing power for the housing market," he said.

"There still exist significant risks in terms of a big current account deficit on the balance of payments which can lead to rand and imported price volatility, while food prices are always at the mercy of global weather patterns."

On top of that, South Africa's "stagnating" economy suffered from a lack of positive structural reform.

For the time being the big difference between the economic risks of 2008 and the present appeared to emanate from the oil market.

"It would appear that, for the time being, South Africa's residential market has one sharply diminished source of 'shock risk' to worry about as an oil glut sets in," Loos said.

"Events in the oil markets, and signs emanating from the local residential building sector, thus seem to be where the good news lies for residential property at present."

fnb  |  john loos  |  oil  |  food security  |  property
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