Weekend Argus (Saturday Edition)
Unanimously confident of a bright future
Estate agents welcome stable interest rates as good news for housing and consumers, but are not sure how long this will last
A STABLE interest rate is good news for the housing market and consumers, say estate agency bosses.
But they can’t agree on whether interest rate hikes are in the pipeline for next year.
Seeff chairman, Samuel Seeff welcomed the latest decision by the Reserve Bank’s Monetary Policy Committee to retain the repo rate at 5 percent.
“Right now, a stable interest rate is the best course for the property market and the economy as a whole. Although there have been some calls to lower the interest rate, such a move could encourage short term spending, which the country doesn’t need right now. It is vital that consumers start saving and that we encourage and foster a strong savings culture. Now more than ever, we would encourage home owners to deposit their annual bonuses and any spare cash into their home loans, which will stand them in good stead to weather future interest rate hikes.
“As we head into the holiday season, traditionally a period where imprudence tends to outweigh caution when it comes to spending, a stable rather than fluctuating rate sends the right message. Already, it is likely that a rate hike towards the end of next year seems increasingly unavoidable.”
In any event, he believes the low rate has done little to stimulate economic growth and has c er t ai nly not encouraged wholesale property buying. He says the continued stringent mortgage lending criteria simply does not support an noteworthy increase in the number of home loans granted.
“This year buyer enthusiasm has been renewed and there’s been a notable uptick in activity in the primary housing sector in major urban areas. Although caution remains the order of the day, trading conditions are at the best levels since t h e e c o n o mic d owntur n . Unnecessary fluctuation or a premature interest rate hike is likely to dent consumer confidence.”
S e e f f b e l i e ve s t h a t a n improvement in the property market is good news across the board. It means that more South Africans are buying homes – in the lower to middle sector of the market where it is needed the most, and in the upper end of the market. Though conditions remain heavily influenced by the overall consumer debt levels, a stable interest rate enables those who can to take advantage of the favourable buying conditions. He says that more should be done to encourage home ownership and once again calls
‘It is quite likely that we will start seeing an interest rate increase during 2014, which will put pressure on consumers’
for further easing of the mortgage lending criteria and measures such as full bonds and longer repayment periods for first time buyers.
The Monetary Policy Committee’s decision to leave the repo rate unchanged at its historic low, is reassuring for aspirant and existing home buyers, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
“This provides a stable environment conducive to making long-term financial decisions, such as buying property, and helps fuel positive sentiment in the residential property market. Bearing in mind that a variety of factors affect the MPC’s repo rate decisions, the repo rate is expected to remain unchanged during 2014. The combination of a stable and low interest environment creates a climate of certainty which provides further impetus for the property market,” says Dr Golding.
Although the prime interest will remain at 8.5 percent for the rest of 2013, property owners should make the most of the current rate before possible increases are implemented next year, says Adrian Goslett, chief executive of Remax of Southern Africa.
“It is quite likely that we will start seeing the interest rate increase during 2014, which will put slightly more pressure on consumers. Consumers have enjoyed a remarkably low interest rate for the past few years with the prime interest rate dropping by a staggering 5.5 percent since the property boom, which has opened up several opportunities to buyers who were previously unable to afford property. Aspiring homeowners who have waited it out before taking the opportunities presented in the current market may soon find themselves missing out if they don’t act now,” says Goslett.
He warns that favourable conditions for buyers won’t last forever. “We have already seen significant changes in the market with more sales over the past two years and things are certainly looking up for sellers,” he says. The growing demand for property has also pushed property prices up, with prices far beyond those during the boom in some regions. He believes buyers could soon find themselves in a similar situation to that during the boom period.
“There are buyers who can buy property with cash, but most South Africans are dependent on finance for buying homes. It is expected that the predicted rate increases during 2014 will affect the buyers who want to enter the market, as well as existing home owners with bonded properties,” says Goslett.