The decision by the South African Reserve Bank’s Monetary Policy Committee to retain the repo rate at 7% (home loan base rate of 10.5%) is a welcome reprieve for the economy and housing market, says Samuel Seeff, chairman of the Seeff Property Group.
Importantly, he says, it provides some stability in an otherwise rather unpredictable climate, both politically and economically. This has emerged as the year of unpredictability, from the surprise Brexit decision to the unexpected emergence of Donald Trump as the next President of the USA.
We therefore welcome the stability. The flat interest rate is also a welcome boost for the economy and housing market that is increasingly feeling the pinch of stalling economic growth that has now manifested in rising unemployment and higher inflation.
We are going into one of the busiest periods for the economy, the retail sector especially is dependent on good festive season trade, as is new vehicle sales. Seeff says that this is also the time that many start thinking about investing in their first home or whether the time is right to upgrade or even downgrade.
The flat rate will certainly be a boost for the market and will allow buyers and home owners to benefit from the savings for a while longer. The sales will be important to keep the first and second quarter of next year in positive territory, given the slowing market and house price growth, he says.
There is no doubt that 2017 is going to be a challenging year with an underlying current of fiscal consolidation, rising costs and inflation and growing pressure on consumers, home owners and buyers. Tax and other cost hikes are also in the pipeline.
For the time being though, the outlook for property remains positive. Although weaker in terms of sales volumes and price growth (save for the Western Cape), the market is in a much better position compared to the post-2007/8 downturn.
The National Credit Act has promoted responsible lending and has curbed the rise in consumer debt. The market is still fairly balanced. Although stock levels have risen, we do not have the added burden of a flood of defaults and distressed sales that hampered the market in the 2009-2012 period.
On the whole, we are still seeing and underlying resilience in the market and expect it to remain on solid ground into the early part of 2017. Ordinary consumers and home buyers are by and large now fairly sensitised to the economic outlook and rising costs. That said, caution remains the order of the day, concludes Seeff.