In line with economists’ predictions, the Reserve Bank’s Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 3.5%, and, thus the prime lending rate also remains unchanged at 7%. Making the announcement, Governor Lesetja Kganyago said that projections of future inflation have broadly stabilised at around 4.0% for 2021 and 4.2% for 2022.
“Keeping rates unchanged is good news for the entire property industry,” commented Carl van den Berg, Business Development Executive at Private Property, “although we must bear in mind that there is still the potential for a 25-basis point increase later in the year, that will depend on whether there is clear evidence that points to improved economic growth.”
The Bank has revised its growth outlook from the previous 3.8% to 4.2% given improvements in trade during the first quarter of the year, but to get growth back to pre-pandemic levels will take some time. In the meantime, the property market, including those in it or considering entering it, can continue to take advantage of one of the lowest interest rates in 50 years.
“Low interest rates support asset acquisition, which in turn boosts household wealth,” says van den Berg. “There were concerns that the property market would crash last year, yet , according to the property research group, Lightstone, we instead saw house prices rising by 3.05% over 2019, which is in line with inflation.”
“We also have to factor in lower prices in particularly affluent suburbs, and lower transfer duties, which have encouraged the entry of new home buyers. They are snapping up properties priced between R700 000 and R1.5-million given that the banks are prepared to consider 100% home loans to new buyers.”
Van den Berg says that he is confident that demand from first-time homebuyers for properties will continue, especially for properties priced below R1-million, which have zero transfer duty payable. “We’re also seeing many more women than men as first-time buyers, which is empowering.”
Sellers are also picking up on the trend of quicker sales. This, according to the top estate agencies, may result in a lack of stock. RE/MAX, for example, has reported this to be the case at some of its offices.
“It is possible that we are already beginning to see the swing from a buyer’s into a seller’s market, which means that we may soon start seeing prices begin their upward climb.” Said RE/MAX CEO, Adrian Goslett.
Samuel Seeff, Chairman of the Seeff Property Group suggests we could even start seeing the build-up to a market-wide boom later this year.
What must be borne in mind, however, is that the MPC’s quarterly projection model in March indicated two increases of 25 basis points during 2021. “We have just dodged the first, but should the Bank follow through on this model in the fourth quarter, we’d like to see homeowners prepared,” says van den Berg.
“This is a crucial time for South African property owners who should also be preparing for municipal tax hikes, planned for July, and the potential of higher fuel prices,” warns van den Berg. “I highly recommend that homeowners relook their budgets to ensure that they can maintain their home loan obligations and continue to enjoy the pleasure of home ownership.”