Agents applaud choice to keep rates fixed
Mortgage finance is the cheapest it has been in three decades – meaning significant savings for ordinary home buyers
THE LATEST decision by the Monetary Policy Committee (MPC) to keep the repo rate stable was generally anticipated by market commentators.
“Taking into account the heightened inflationary risks viewed against the backdrop of a still sluggish economy, the MPC’s stance appears to be a c onsidered and moderate approach,” says Dr Andrew Golding, chief executive of the Pam Golding Property Group.
“Although such decisions depend on current economic data that is influenced by a variety of macroeconomic factors, including global impacts, we believe that interest rates will remain stable for the remainder of 2013.
“S e l l e r s a r e b e c o ming accustomed to the current trading conditions and the need for realistic, market-related pricing, but the flow of stock available for purchase is not always sufficient to meet the demand, resulting in shortages in some areas and in some instances a number of buyers are competing for a single property. Our outlook remains positive for the future and for the forthcoming year,” he says.
The MPC’s decision to retain the repo rate at 5 percent is welcome news for the stability of the property market, says Seeff chairman, Samuel Seeff.
“Despite the renewed economic uncertainty and downward economic growth adjustment since the second half of last year, trade is stable with about 18 000 to 20 000 monthly deeds of f i ce t ransactions. Although the wider macro-economic landscape is still not conducive to a real recovery, the market has settled into a ‘new normal’.
“Overall consumer indebtedness has reduced since 2007/8 and the banks are more willing to grant loans, although the high levels of consumer debt still constrain overall sales volumes. This notwithstanding, there is life in the market and well-priced properties are selling, with stock shortages becoming a reality in most of the major metropolitan areas,” says Seeff.
“A rate hike towards the latter part of the year is probably inevitable, but even at a 1 perc e n t i n c r e a s e , mor t g a g e finance is now the cheapest it has been in more than 30 years. For ordinary home buyers, this means there are significant savings to be had right now.
“According to FNB’s most recent house price index, average prices are on the whole down by about 20 percent since 2007/8 and this, combined with the low interest rate, makes it an ideal time to buy.
“Although we would need to wait for overall economic sentiment and macro-economic fundamentals to improve, the market seems to be gaining momentum and for now, it remains business as usual with sellers and buyers doing good business daily,” Seeff says.
Adrian Goslett, the chief e x e c u t i ve o f RE/ MAX o f Southern Africa says it came as a relief that the MPC decided to leave the prime interest rate unchanged, given the fact that consumers have already experienced massive petrol price and electricity tariff increases over the past month.
The interest rate was cut by 50 basis points from 9 percent to 8.5 percent during the MPC meeting in July 2012 and it has remained unchanged for the past year.
Goslett says that with many South African consumers already feeling the pressure of high debt-to-income ratios, the decision to leave the interest rate at its current level offers consumers further opportunity to pay down debt levels and get themselves into a better position to deal with the everincreasing cost of living.
He says that although homeowners with fixed interest rates will be less affected by the fluctuation of the rates over the terms of their loans, those without fixed rates have experienced a decrease in their monthly repayments since the property boom.
“Ideally, homeowners whose repayments are lower should take advantage of the current rates and pay the extra money into their bonds. Increased payments will reduce loan terms and pay them off faster, without affecting budgets too severely,” he says.
Riaan Roos, the chief executive of MSP Developments, says MSP expected the rate to remain unchanged.
“Although the property market has slightly improved this year compared with last year, it remains relatively flat. Consumer indebtedness continues to put pressure on households and their disposable incomes. Our guess is that property sales will continue to track changes in the economy and gradually improve into an upward curve, although from a relatively low base,” Roos says.
“We d o n’ t f o r e s e e a ny volatility in the property market – and with this in mind we believe potential buyers should take advantage of the stable and low interest rates and buy sooner rather than later.”
A RELIEF: Adrian Goslett, the chief executive of RE/MAX of Southern Africa
WE L C O ME N E WS : T h e chairman of Seeff, Samuel Seeff
CONSIDERED: Dr Andrew Golding, chief executive of Pam Golding Property Group