Unchanged repo rate helps but won’t boost consumer confidence

THE MONETARY Policy Committee missed an opportunity on Thursday to boost consumer confidence and market sentiments, say some property practitioners in reaction to the repo rate remaining unchanged at 7%.

While the decision was expected, “a reduction would have provided a much-needed boost for consumer confidence and market sentiment given the ongoing weak economic growth experienced in South Africa”, says Dr Andrew Golding, CEO of the Pam Golding Property group.

This sentiment was shared by Herschel Jawitz, CEO of Jawitz Properties.

“This was a fantastic opportunity for the Reserve Bank to make a definitive move in the face of declining inflation and a slowing economy to cut interest rates by at least 50 basis points.

“... This is a lost opportunity and as a result, the economy and the people of South Africa will continue to suffer for reasons that are our doing, and ours alone.

“Aside from the positive financial impact of a rate cut on home owner- ship and affordability, the impact of heightened consumer confidence would have had an equally positive impact on the residential property market. If consumers feel more confident, they will make longer term spending decisions, of which buying a home is one of the biggest”.

Adrian Goslett, regional director and CEO of Re/Max of Southern Africa, however believes there are still benefits to a stable interest rate.

“With the country currently in the midst of economy instability, households should see the stable rates as an opportunity to get their finances in order and build up cash reserves where possible.”

Goslett says the stable interest rate will assist potential homebuyers to assess their affordability levels and financial readiness to the enter the property market.

Samuel Seeff, chairman of the Seeff property group says a flat interest rate and lower inflation (down to 5.3% from 6.1% in March) gives “more breathing space to consumers and home owners and allows buyers to benefit from a rate saving and get slightly bigger bonds”.

This, he says, is good for the property market which “continues at a fairly balanced pace”.

Although some areas are reporting increasing stock levels coming onto the market combined with fewer buyers, “the overall picture remains that of a still well-balanced property market”.

“We have also not seen any drastic rise in distressed sales coming onto the market and anticipate stable conditions for the remainder of the year,” says Seeff.

“Sales are however, now taking longer and buyers, aware of the shifting market conditions, are more particular about the prices that they will pay, something that sellers need to be cognisant of.”

The banks are also taking a more conservative outlook with deals taking longer to be approved. “Buyers are urged to ensure they buy within their means, have good credit records and meet all of the qualifying criteria to avoid disappointmen.”

While the country awaits the ratings announcement from Moody’s, the third major global ratings agency, and against the backdrop of volatile socio-political factors and slower national house price infla- tion, Golding agrees the residential property market “overall, remains strongly resilient”.

“...Over the past few years the market has remained remarkably robust, given the poor performance of the economy and nationwide unrest over lack of service delivery and lack of jobs...The Western Cape regional market in general and Cape Town in particular, strongly outperformed inflation last year,” says Golding.

Standard Bank’s recent data shows Western Cape property leading the field with values 39% above their trough in 200809, with Gauteng not too far behind with price growth of 35.5% over the same period. FNB’s latest property barometer shows house prices in April improving to 5.5% nationally.

Mike Greeff, CEO of Greeff Christie’s International Real Estates believes “the lower than expected inflation rate could leave room for a welcome rate cut by year end”.

He says the slight slowing down of the growth in Peninsula prices is a reflection of a national trend and also possibly a statement from the market regarding the increasing cost of living. However, he says, there are pockets of exceptional growth in the higher-end regions, particularly on the Atlantic Seaboard, where a year-on-year houseprice growth of 33.9 % has been recorded, while prices in the City Bowl grew by 20.9% – IMS Property