2008-Jul-13 - Reevaluating the property sector

JULY 25, 2008. D-Day. The events of the day will be keenly watched. The market is expecting a possible interest rate rise on that day as Bank Negara meets.

“We expect interest rate go up as early as July 25 ... we expect a 50 basis points increase, or 0.5%, to be done in two instalments between then and the end of the year,” says an analyst.

Indonesia has increased its key interest rate 25 basis points to 8.75 to curb soaring inflation which could rise from 11.03% to 12.5% by the end of the year. Eurozone rates hit a seven-year high as it battles inflationary pressures.

As we take a short breather from the roller coaster ride that has been inundating the country the past several weeks, we have to admit these are interesting times, on the national front and globally, politically and economically.

Never in the last five years has inflation in the country hovered at more than 6%. That’s June for you. With the rise in electricity tariff, this may go up to 7% for July. Generally, it’s been around 3%.

Binding the national political and economic scenario is the global credit crunch, rising food and fuel prices.

Bankers and developers say the second half of the year will be challenging and stressful. There may be a period of slowdown between now and the end of the year.

The general consensus is that “it will take a year before things stabilise.” The more optimistic think six months.

What does all these spell for the property buyer? more...