Unchanged repo rate won’t end weaker market

WHILE welcomed, the announcement that the repo rate will remain unchanged will not be enough to stop the property market from continuing on its weakening path, experts say.

FNB property economist John Loos said it would have required a rate-cutting stimulus to end the gradual decline in real property values that are under way.

Loos further warned that the combination of the ongoing economic weakness and sideways movement in interest rates could cause the consumer to become “still more cautious with spending habits”.

This could also likely further increase in the average time of homes of the market from the 16 weeks and four days estimated average as per the FNB Estate Agent Survey.

“We have already seen signs of the decline in the form of less selling of homes in order to upgrade, a greater portion of financially pressured sellers opting for rental as opposed to buying, and a slowing pace of non-essential secondary-home buying.”

Seeff Property Group chief executive Stuart Manning said that given the recessionary outlook, renewed currency volatility and inflation creep, the announcement by the Reserve Bank’s monetary policy committee (MPC) that it would retain the repo rate at the current level of 6.5% was only likely to be a short-term breather as a rate hike may well come sooner than hoped.

Manning said the flat interest rate, slow price growth, rise in property stock levels and positive bank lending landscape made it a good time to buy.

He added that, although slower, the property market was nowhere near the worst levels of the 2008 global financial crisis.

Mike Greeff, chief executive of Greeff Christie’s International Real Estate, said: “With the recession a reality, the government has taken the conscious decision to avoid straining consumers even further than they are currently, and will be positive in helping people maintain their current bond repayments.

“South Africa is heavily dependent on foreign cash flow, and any failure to curb inflation is seen as a government failure by foreign investors. A lack of investor confidence has a negative knock-on effect in every other sector of the South African economy.”

Regional director and chief executive of Re/Max of Southern Africa, Adrian Goslett, warned of a possible interest rate climb over the next few months and advised homeowners to make room in their budgets for this as it would increase the instalments on their home loans just before the December holidays.