South African property market still slowing down

As different crises start to affect the country, the start of the year optimism about South Africa's property market has largely gone south.

It is not a good time to be invested heavily in the South African economy. The combination of natural factors affecting the whole developed world and recent events in Cape Town such as the electricity shortage and surging price of gold have made the economy in that country very uncertain.

However, one thing that is not uncertain anymore is the South African property market, where numbers that were recently released prove beyond the shadow of a doubt that the momentum the market has experienced over the last few years is starting to slow down in a big way.

The results were released in the form of the Residential Building Cost Index for the final quarter of 2007, and they show that the rate of inflation of building costs is starting to get smaller. In fact, the results that were just released for the final three months of 2007 mark a five quarter streak of decreasing inflation and that does not bode well for people that are investing in the property market and looking for some quick returns.

The way the index measures these quantities is to take a look at a national average for building costs per square metre and in the fourth quarter of 2007 that average building cost was SAR 5264. That represents inflation of approximately 4.7% from the previous quarter, which while still representing an increase in property values, is nevertheless down significantly from the 10% of the previous quarter and the peak of 38.8% just over a year ago.

A combination of a number of different things has resulted in these numbers. There are general slowdowns in the South African economy and in addition to that there have also been hikes in interest rates and of course the echo effect from similar problems happening in the economic powerhouse United States. At the current moment in time, the bottom line is that the slowdown in inflation for the South African property market is expected to continue for the foreseeable future.