Listed property unlikely to be affected by repo rate

A 25 basis point increase in the repo rate today, is unlikely to have any effect on South Africa's listed property sector.

The little interest rate hike will not impact longer-term funding rates as well as not ad to a slowdown in economic activity.

The Monetary Policy Committee’s (MPC) decision has allowed a breather ahead of the next meeting, where interest rates are likely to remain on hold if there are no major external shocks and if inflation expectations continue to be anchored, albeit at levels within the upper end of the SARB's targeted range.

The MPC does not have a mandate supporting economic growth, however it acknowledges the impact that its monetary policy decisions have on the wider economy. Against a backdrop of decelerating consumption expenditure, notably in the private sector and ongoing labour unrest, South Africa’s economy is not positioned to absorb significant interest rates hikes at present.

Therefore, interest rates are assumed to stay at lower levels for longer, which should provide support to present listed property valuations and contribute to motivating distribution growth throughout 2014 and 2015.