Real­tors don’t like Mar­cus’s move to keep repo rate steady

Weekend Argus (Saturday Edition) - - PROPERTY -

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.”

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