Real Estate Investor Magazine South Africa February 2016 | Page 5

VIEW FROM THE TOP

Look Back to Look Forward

Confidently

A

new year always brings new challenges and
opportunities. On the economic front there
are mostly doom and gloom predictions for
local and world economies, including a stock market
and currency crash. Many economists and experts also
predict a drop in real estate markets with looming
interest rate hikes and lack of bank finance. Locally
the effect of the weakening rand is still having adverse
effects on SA inflation and business prospects. Inflation
tends to be good for real estate as prices tend to
increase. The middle class consumer is under financial
pressure, burdened with increased levels of household
debt as higher living costs creates havoc while they
strive to maintain their standard of living. Government
policy drives sentiment and wealth and SA has failed
dismally in that department. GDP growth predictions
are barely above 1% for 2016.
Winston Churchill said, “Study history. In history
lie all the secrets of statecraft” and that, “The farther
back you can look, the farther forward you are likely to
see.” In the early 1980’s, when Ronald Reagan was the
incumbent president of the US, he instilled new policies
that benefitted the ultra wealthy which separated them
from the poor and middle class. In fact these policies
caused working class wages on a downward trend while
factory jobs disappeared. The number of super wealthy
people doubled along with their wealth through lower
taxes through capital gains breaks over the same period.
The same picture is evolving in the SA economy today.
In 1981 - 1983 recession hit the US (and other parts
of the world). Thereafter, artificial wealth was being

created by the creation of credit card debt. People started
borrowing more to sustain their standard of living. This
rise in debt has continued almost [