Mixed reaction to interest rate announcement

Private Property South Africa
Private Property Reporter

The decision by the South African Reserve Bank to leave the repo rate unchanged at 6.75% has been met with mixed reactions by the property market.

Simon Bray, Private Property

It’s not surprising that the MPC has adopted a wait-and-see approach with regards to the interest rate. There is still a lot of uncertainty on how the political situation plays out, we are still under threat of a credit downgrade and the Budget Speech in February could bring some unpleasant news for consumers, so there wasn’t much scope for an interest rate cut at this time. If the economy continues to improve and the political climate stabilises, we will hopefully see a rate cut later in the year.

Adrian Goslett, RE/MAX

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that while interest rates remain favourable and stable, homeowners should try and place themselves in the best possible financial situation to be able to mitigate any economic changes in the future. “A steady low-interest rate gives consumers the opportunity to create an emergency fund that will see them through any financially challenging times they could face the future. It is also an opportunity to reduce their level of debt before another hiking cycle,” he says.
Goslett adds that periods of interest rate stability also provide homeowners with the opportunity to budget and possibly pay extra into their bond accounts to reduce the amount of interest paid, as well as reducing the term of the loan. “If a homeowner has a bond of R1 million at the current prime interest rate of 10.25% over 20 years, and they paid an additional R500 into the bond every month, they will reduce the term of the loan by almost three years, and they will save R221 106 in interest,” he explains.

Dr. Andrew Golding, Pam Golding

Says Dr Golding: “With the economy expected to strengthen somewhat and interest rate hikes most likely delayed, the outlook for the local housing market is more upbeat this year. Just how much better, will become increasingly apparent in the weeks and months ahead. “While traditionally the residential property market in South Africa experiences a quieter period over the festive season, from a Pam Golding Properties perspective we began the year on a high note – with our Atlantic Seaboard office experiencing its busiest December trading period on record, partly due to renewed confidence in the market now that there is some political stability.

“Our Cape Town Southern Suburbs are also reporting robust sales activity, with considerable interest in the top end of the market from Gauteng buyers. Overall, there is substantial interest from buyers and the sentiment is that property which is priced correctly is selling, and will continue to attract buyers.

“The demand for property in the Mother City’s residential developments market shows no signs of abating, remaining a healthy market for new, off-plan developments. Buyers are cost aware, seeking fair value and good capital growth, with this sector buoyed by a big investor market as well as a strong demand from those wanting to scale down. We are experiencing numerous enquiries for such opportunities, with very good developments set to come on stream to cater for the ongoing demand. “Other positive factors currently evident include an uptick in sentiment in the Gauteng market, with heightened activity and interest from serious buyers across all price bands, including the luxury market above R10 million, and also within secure residential estates. Generally show day attendance is up and in some areas a ‘clean-out’ of properties is seeing agents now looking for stock. Our Gauteng region also reports that December 2017 sales exceeded those for December 2016 in both units and value.”

Samuel Seeff, Seeff Property Group

Today’s decision to retain the repo rate is very disappointing for the economy and property market, said Samuel Seeff, chairman of the Seeff Property Group. We enter the year on more positive note and with the improvements in the currency and stability of the CPI rate within the SARB target range, the time is right for a rate cut to stimulate the economy and property market.

Seeff said further that the much awaited appointment of Cyril Ramaphosa as President of the ANC and President in waiting of SA has boosted consumer and business confidence and is sending a positive message to the market.

The announcement of an Inquiry into State Capture, the JSE performing above expectation, improvement in the currency, petrol price drop and this interest rate drop, all bode well for the year ahead.

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