Forget about the petrol price...

[Canaris]

Builders are making a killing at the moment...

Dumb question' date=' how is that possible with no one being able to buy ?

[/quote']

 

dont assume that because some people are struggling the whole of SA is in depression.

 

There is a HUGE building boom @ the moment...

 

not according to my friends in the building industry

[Jackes]

thanks Kona, neither anyone i know, seeing that i am quite involed in property investments too..   I see this is heading towards a catfight

[Thug]

 

As I understand it' date=' the reason for pushing up the prime interest rate is to encourage people to save.  This is done in 2 ways, - 1. Higher interest from the bank on savings (if you can afford to have savings, that is) - 2. Stop people goin gout and buying things that they really can't afford and hence have to buy on HP etc.

 

.....

 

[/quote']

 

Your basic premise is correct although the saving element is more of a by-product.

 

The fact of the matter is that by increasing interest rates, money supply in the market place shrinks as consumers can no longer afford to obtain credit.

 

 

[fandacious]

 

not according to my friends in the building industry

 

Kona - my old man is a quantity surveyor. He cannot keep up with the amount of work. Every day he gets big building firms asking for help because their workload is just too much. There is SOOO much building going on at the moment they cant keep up

[scotty]

Catch 22 here, not as black and white but the idea is to save however even with the added interest paid on investment it is still lopsided on the short side when taking into account higher prices for goods bought. And if you save money the tax man wants a slice over a certain amount, invest in property and the taxman hits you with capital gains.

[fandacious]

The fact of the matter is that by increasing interest rates' date=' money supply in the market place shrinks as consumers can no longer afford to obtain credit.

[/quote']

 

But thats the whole point. SA has one of the highest debt to earnings ratios in the world. The whole problem is that we spend too much on credit. The government is trying to reduce credit. once you have less credit, you will have more available cash...

[fandacious]

invest in property and the taxman hits you with capital gains.

 

CGT is only applicable if you make more than a mil profit on a property you sell, and if you dont re-invest that money into property straight away...

 

you making a mil on every property u sell?

[Thug]

 

The fact of the matter is that by increasing interest rates' date=' money supply in the market place shrinks as consumers can no longer afford to obtain credit.

 

[/quote']

 

But thats the whole point. SA has one of the highest debt to earnings ratios in the world. The whole problem is that we spend too much on credit. The government is trying to reduce credit. once you have less credit, you will have more available cash...

 

 

[Jackes]

not if your not able to sell, cause no one can buy the property ( that you cant afford anymore )

[MintSauce]

I supply the hardware industry and believe me, some guys are just short of hitting a panic.

 

Our prices have gone up 45% this year as a result of a 60% hike in the steel price, steel being our largest expense. In spite of the 45% price increase, our turnover has not climbed.

 

Do the math....we're moving a LOT less stock.

 

 

 

 

[scotty]

invest in property and the taxman hits you with capital gains.

 

CGT is only applicable if you make more than a mil profit on a property you sell' date=' and if you dont re-invest that money into property straight away...

 

you making a mil on every property u sell?

[/quote']

I wish.

[fandacious]

I wish.

 

Damn... i was about to go into the property selling business

[Francois]

Yes Francois' date=' but spending? ( credit card / installments / everything ) has been going down since Feb, but still they beat us with the rate hikes, while food and fuel ( higher prices = higher spending ) is out of our control.

?

Dont even get me started on the Eskom issue. pathetic

[/quote']

 

Spending has been going down.... so maybe it's starting to work on that side. Food prices are a problem as are fuel.??Food - shortage of food and increased production costs are obviously part of the problem here, but I must admit I haven't really applied my mind to this one too much.??Fuel - apart from the basic cost the second bigest factor seems to be the government's levy, maybe something could be done there, but then we have to remember that the government will want to replace any loss of income so we will be taxed somewhere else.??Then we must also remember that it wasn't too long ago that brent cude was at $ 27 a barrell, and is now in the region of $ 125. 362% increase and the rand has also depreciated since then.??Unfortunately with SA only consuming about 1.5% of the world's oil, not much we can do there.

 

But as said before, the repo rate does tend to be cyclical and the economists are predicting it to start coming back down in 2009. ?Obviously too late for some. ?And house prices are also expected to only start appreciating again in 2010.

 

 

 

[Jackes]

something else - i see the R 30 levy for the new crap system at vehicle licencing office, was'nt only last year, its every year...

[FanieFiets]

ek dink die columnist het enige ekonomie gehad nie. Ongelukkig werk die goed NIE op 'n logiese manier nie en Tito se ENIGSTE job is die monetere beleid te beheer om inflasie in te kort. Sy ENIGSTE tool interest rates.  Hy het NIKS met die fiskale beleid te doen nie. Dit is JUIS veronderstel om totaal onafhanklik te wees.

[linnega]

Firstly, the interest rate hikes are not a punishment, but an economic tool.  As normal human beings interested in preserving our own wealth it is easy to be caught up in the clamour to lower interest rates.  Increased interest rates have curbed excessive spending particularly the credit retailers (have a look at the results coming from Foschini and Edcon), which makes it clear that they are effective.  Sure, inflation has continued to climb, but it would have been worse without the hikes.  For most consumer goods (mostly imported from the East) a stronger rand will lower input prices and lower inflation in those sectors.  The problem has been the price of commodities (steel, gold, platinum and oil among them) have sky-rocketed in the past year and this has increased the input prices for all goods.  A shortage of food supply has increased the cost of foodstuffs.  The only tool the Reserve Bank has is to increase interest rates to try and control inflation in the short term (a 2% hike is a shock increase by the way and that is coming).  The impact it has on the man in the street is that for the period that interest and inflation are high, times will be tough, but then 2 years ago interest was low and inflation almost non-existent.

 

The building industry is still booming, although many of the new entrants will slowly have to retreat as the bigger players use their economies of scale to manage huge increases in input prices (steel in particular, but also cement) and still win tenders.  So Minty, if you compare over 5 years, the average growth has probably been excellent, but over the past year poor because you are comparing to an unreasonably high base.  It certainly doesn't mean the building industry is in any crisis.  If the prices of steel continue to rise though beyond 2010, then we will see some large scale bankruptcy in the building industry.