The decision by the Reserve Bank’s Monetary Policy Committee (MPC) to retain the repo rate at 6% (basic mortgage loan rate of 9.5%) is, while not unexpected, nonetheless a most welcome move according to Samuel Seeff, chair of the Seeff group. This follows on the good news that inflation has held steady at 4.6%.
The recent decision of the US Fed (USA Federal Reserve Bank) to retain its near zero repo rate coupled with the volatility in the Chinese economy provided some support for a flat rate expectation. But, adds Seeff, the recent slump of the rand and poor economic data for the last quarter meant this was one time where we were holding our breaths, especially after the July hike shock.
Consumers and home owners are facing mounting economic challenges and the relief should not be underestimated. When borrowing costs increase, it is not just home loans that become more expensive, there is a knock-on effect on other costs. Consumer confidence tends to dip as does the demand for property. Even cash buyers usually take a more cautious ‘wait and see’ approach. This should then be seen as the appropriate decision for the economy and property market right now. In any event, the July rate hike did little to stem inflation or protect the rand that went into freefall soon after the announcement.
That aside, we are now heading into the busier summer property sales period as well as the time when and retail sales tend to start peaking. It is therefore vital that there is no upheaval in the economy. Seeff says that we have now had about six weeks of almost no load shedding and this, together with the flat rate should fuel some positive economic sentiment. For the property market, it is good news all-round.
It is an interesting time for the market, he adds. Although activity has slowed, there is no slump on the horizon. Yes, demand and price growth is down year-on-year, but this is to be expected. This notwithstanding, activity in the primary sector and some secondary markets is still at better levels compared to five years ago. We also do not have the flood of distressed properties and second homes to contend with. Many areas are still characterised by stock shortages with new stock very slow to come onto the market. This, coupled with still healthy demand gives us a nicely balanced market. We still see this as a positive phase and expect the good trade to continue into the early part of the new year. As we head into the traditionally busier summer months, it remains a good time to be a seller, provided that price realism prevails.
The flat interest rate provides another opportunity for buyers to still take advantage of the savings on offer. The slowing price growth is a further boost for buyers to find good value. Finally, while we remain in an interest rate hiking cycle, it may well now come a little slower than anticipated