Realtors don’t like Marcus’s move to keep repo rate steady
THE MONETARY Policy Committee’s decision to keep the repo rate steady has disappointed realtors.
A drop “would have been good news for cash-strapped consumers, including home buyers and existing home owners, and would have provided a most welcome year-end boost just before the festive season”, says Andrew Golding, chief executive of Pam Golding Property.
The latest repo rate decision by the Reserve Bank means no festive celebrations for the property market, says Brian Falconer, chief executive of Colliers Residential.
“We would have been delighted if Gill Marcus had seen fit to cut the repo rate by a further 50 basis points in her first act as governor of the SA Reserve Bank.
“It would have been just the shot in the arm the property market needed before the festive season.
“Added to the 500 basis point cuts we have enjoyed over the past 12 months, an extra rate cut would have improved the mood in the property market, and encouraged fencesitting buyers to make decisions, especially as they would have had time on their hands to go viewing in the holidays,” says Falconer.
Golding says: “This decision is against the backdrop of the residential housing market performance with the extraordinary highs of three years ago when growth was at 30 percent a year, to the calamitous lows where house price sales fell by 50 percent.”
Falconer says: “There can be no doubt that 2008 and 2009 have been the toughest years in living memory for anyone in the property market today. Chipping away at an interest rate that has hindered home buyers and sellers has helped free up the market gradually, and we hope for a proper recovery over the next 12 months.”
“In the past six to nine months there has been slow, steady growth in house price sales, off the bottom point of the market,” Golding says.
“It seems likely this positive trend will prevail and sentiment continues to improve as mortgage lenders re-enter the market and start competing for business. House price growth has begun to move into positive territory once again and this trend is likely to continue. However, growth in house prices is likely to be moderate at best in the short to medium term until the end of 2010.
“It also appears likely that interest rates will probably remain flat for the next quarter or two, and then, depending on factors including the inflation outlook, may result in an increase in rates in the latter half of next year. On a positive note, and as the 2010 World Cup draws nearer, the results of investments in infrastructure such as stadiums, airports and roads, become more apparent by the day and anticipation is mounting about the positive global exposure for South Africa,” says Golding.
Falconer notes factors that would have swayed the MPC’s decision:
Factors in favour of a rate cut: The strong rand, which cuts the cost of imports; steady inflation; the relatively low oil price; the country’s positive import/export balance; and the need to stimulate the economy, with the retail sector down around 4 percent year on year.
Factors against a rate cut: The looming Eskom price hikes; paradoxically, the strong rand, which harms exports and therefore jobs; the oncoming winter in the northern hemisphere, which pushes up the oil price; rand volatility; and retail spending over Christmas which will mean significant credit extension.
“We concur with several industrialists and market commentators who have called for a repo rate settling down at around 5 percent,” says Falconer.
“We hope SA will move in this direction in the next 12 months.”