Harcourts News

Today's reports that fuel prices are expected to rise even further in October, largely due to the sharp rise in crude oil price, will definitely have an effect on the property market.

Sources are saying the department of energy published information today that the price of gasoline 93 ULP & LRP in Gauteng might increase by 26 cents per liter in the first week of October with the price of diesel expected to rise by 37 cents per liter.

Consumers who are already under financial pressure and in a price pinch due to food cost highs, transport cost increases, stricter banking lending criteria and other macroeconomic factors will feel it even harder.

The rental market might experience it directly as it is usually more prone to react to economic fluctuations. The difference usually comes in where people who rent are able to make changes to their financial situation by scaling down their home choices. Whereas a home owner’s process cannot be changed quickly.

The greater effect on the rental market in the past has been that the demand for rental properties close to business districts, schools and amenities also increases in an attempt to curb excessive transport costs.

The residential sale market is not usually susceptible to short-term changes like fuel price increases and decreases, however there are a percentage of buyers balancing on the decision whether to buy now or not who might be more hesitant to make a financial commitment now. However, short term cycles usually don’t play a major role.

Statement by Richard Gray

Recent data from the Department of Energy pointing to a petrol price hike of around 55 cents a litre, and diesel costs increasing by approximately 39 c/l has a definite influence on the economy. Despite the property market being seen as a long term investment and to a large extent resilient to short term economic fluctuations the rental market can often be susceptible to market instability and price hikes.

The drop in fuel prices set to happen this coming Wednesday is a welcome relief for many cash strapped consumers and businesses.

Fuel price decreases translate into a reduction in transport costs which means the price of household expenses are also reduced – such as food and transport costs. The same applies to businesses who are affected by high transport costs, they are set to experience an ease in expenses across an array of categories.

The for sale property market is not usually susceptible to short term changes like fuel price increases and decreases, however the rental property market might be more vulnerable to these fluctuations. Studies in the past have indicated the price of fuel is a major factor taken into consideration when future tenants are deciding on areas to rent.

As fuel prices increase the demand for rental properties close to business districts, schools and amenities also increase in an attempt to curb excessive transport costs.

Similarly with the price of fuel coming down South Africans will have more expendable income and might look to more expensive areas as well as consider a wider geographic region.

However, as the Rand continues to make gains against the dollar and international petrol prices remain low South Africans will undoubtedly benefit and we should make use of this breather to help buffer us against any financial uncertainty over the coming months by saving, investing or paying off debt faster.