Ex­perts wel­come un­changed repo rate

Gives home own­ers some respite as eco­nomic, hous­ing mar­ket out­look re­mains weak

Weekend Argus (Saturday Edition) - - PROPERTY -

AGENCY bosses have wel­comed the de­ci­sion made by the South African Re­serve Bank to keep the in­ter­est rates un­changed, with the repo rate stay­ing at 7 per­cent and the prime lend­ing rate at 10.5 per­cent.

Chair­man of the Se­eff prop­erty group Samuel Se­eff says the de­ci­sion by the Mon­e­tary Pol­icy Com­mit­tee of the Re­serve Bank to leave the repo rate un­changed is most wel­come in a cli­mate where the eco­nomic and hous­ing mar­ket out­look re­mains weak. “Save for any ma­jor dilemma, it also now seems likely that we will see the year out with­out any fur­ther in­ter­est rate hikes.

“The de­ci­sion was ex­pected by the mar­ket given that the CPI (Con­sumer Price In­dex) has re­mained fairly sta­ble, al­though still at the up­per tar- get range, while the cur­rency has re­gained some of its losses.”

This good news fol­lows the un­ex­pected an­nounce­ment ear­lier this month that the GDP in the sec­ond quar­ter of 2016 grew by a very en­cour­ag­ing 3.3 per­cent, says Se­eff. “The change in lo­cal government in key met­ros has also been a mas­sive pos­i­tive in­jec­tion for the coun­try and, if the DA starts to de­liver, it will ben­e­fit ev­ery­body.”

This is now the third suc­ces­sive meet­ing that the rate has stayed put and, Se­eff says this breather is good news for home­own­ers who can now ben­e­fit from a rate sav­ing a lit­tle longer. The flat rate com­bined with the slower price growth also makes for pos­i­tive buy­ing con­di­tions.

“We don’t fore­see any­thing in the short- term that will bring prices down any fur­ther, so it is a good time to buy. The banks are still lend­ing and there is still time for buy­ers to get on to the prop­erty lad­der, but cau­tion is now the or­der of the day,” says Se­eff.

“The eco­nomic out­look re­mains weak, a down­grade in De­cem­ber still looms and, the prop­erty mar­ket has be­gun its in­evitable slow­down.”

Wel­com­ing the de­ci­sion by the MPC to again hold the repo rate steady, Dr Andrew Gold­ing, chief ex­ec­u­tive of the Pam Gold­ing Prop­erty group, says South Africa’s hous­ing mar­ket con­tin­ues to demon­strate ma­tu­rity and on­go­ing re­silience. “The fact that in­ter­est rates have lev­elled off and re­mained sta­ble fol­low­ing these last two MPC meet­ings sends a pos­i­tive mes­sage to home buy­ers and the res­i­den­tial prop­erty mar­ket in gen­eral.

“Fol­low­ing the re­cent suc­cess­ful elec­tions this is a fur­ther con­fi­dence boost for our econ­omy and for those with ex­ist­ing mort­gages or seek­ing fi­nance for res­i­den­tial prop­erty ac­qui­si­tions,” says Gold­ing.

Adrian Goslett, re­gional di­rec­tor and chief ex­ec­u­tive of RE/MAX of South­ern Africa, hopes the Re­serve Bank’s hik­ing cy­cle has come to an end for the time be­ing and con­sumers can use this win­dow to sort out their fi­nan­cial af­fairs.

“There are about 18 mil­lion credit users in SA, and about 50 per­cent of them have im­paired credit rat­ings due to high lev­els of debt. An increase in the in­ter­est rate would place fur­ther fi­nan­cial pres­sure on con­sumers who are al­ready strapped for cash,” says Goslett.

Over the last few years the prime lend­ing rate has in­creased by 2 per­cent, which has had a marked im­pact on home­own­ers and prospec­tive buy­ers. Home­own­ers who bought prop­erty for R1 mil­lion at the end of 2014 with bonds linked to prime, are now pay­ing R1 306 more for their home than when they ap­plied for fi­nance.

Ac­cord­ing to house­hold and prop­erty sec­tor strate­gist at FNB, John Loos, from the end of 2013 un­til June this year, the cu­mu­la­tive increase in the bond in­stal­ment on the av­er­age priced home has in­creased by 42.1 per­cent.

Goslett says the MPC’s de­ci­sion to keep the rates un­changed is the right choice for the prop­erty mar­ket and the greater econ­omy.

“An in­ter­est rate hike would dampen con­sumer sen­ti­ment and fur­ther slow down the prop­erty mar­ket. This year has been tough for con­sumers who have al­ready had to ab­sorb two in­ter­est rate hikes, along with an in­creased cost of liv­ing. Though the hous­ing mar­ket still re­flects an on­go­ing de­mand, the ef­fects of the slower econ­omy and higher fi­nan­cial de­mands on con­sumers have been felt in the prop­erty sec­tor,” says Goslett.

He says af­ford­abil­ity will con­tinue to be a driv­ing force and a rate hike would neg­a­tively af­fect that.

“Con­sumers who can re­duce their house­hold debt-toin­come lev­els have an in­creased chance of show­ing the nec­es­sary af­ford­abil­ity lev­els to buy a home. It may be dif­fi­cult to ad­just to a more re­stric­tive fi­nan­cial plan at first, but it will bring them closer to own­ing a home,” Goslett says.

“The hold­ing of the repo rate by the South African Re­serve Bank, gives the growth in Cape prop­erty prices so far this year, a good chance to con­sol­i­date,” says Mike Gre­eff, chief ex­ec­u­tive of Gre­eff Christie’s In­ter­na­tional Real Es­tate.

“Al­though banks are granting bonds, cri­te­ria are still tough to avoid ir­re­spon­si­ble lend­ing and con­sumers are feel­ing the pinch, but the fig­ures in­di­cate that in­vestors con­tinue to place their con­fi­dence in Cape prop­erty,” says Gre­eff.

“The un­changed repo rate is wel­comed by the prop­erty in­dus­try and those re­pay­ing home loans will ben­e­fit in the short term, but hikes may well be on the hori­zon and should be planned for.”

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