Nedbank Assures Property Market over Current World Crisis - 10-14-08

October 14 - The current conditions in world economy markets are certainly worrying. Major companies are declaring bankruptcy, banks are collapsing, governments are being forced to step in with recovery plans worth billions of dollars, and the average man in the street faces unemployment, soaring interest rates and the loss of life savings.

However, while the rest of the world deals with volatile markets, the chief economist of Nedbank, Dr. Dennis Dykes has assured the local property market that it will not be badly affected. According to Dykes, the fact that South Africa has a relatively low household debt to income ratio (76%), in comparison to over 160% in other countries such as the United States and United Kingdom, means that banks in this country are far more likely to continue with 'business as usual'.

"Banks in these countries are reluctant and unable to grant more credit to consumers," said Dykes about the US and UK, "which will affect all aspects of these economies, particularly property prices."

Dykes said that the current problems in the South African property market were not directly caused by the larger problems around the world. "In other words, the global crisis is not really the cause of the slowdown in our property market," he said. "Higher interest rates, coupled with the huge gains in property prices over the last few years, were already having a cooling effect on our property market."

Dr. Dykes of Nedbank believes that the consolidation that occurred in the South African banking industry several years ago left members extremely strong against outside world papers and his prediction is that if there were to be any damage, it would be very minimal.