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

Weekend Argus (Saturday Edition) - - PROPERTY -

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

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