Consumers will need to tighten their belts after the South African reserve bank announced another rate hike by 25 basis points this week. As of 18 march, the repo rate increases to 7% and the prime lending rate slides up to 10.50%
Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, says consumers will have to tighten their belts once again, although many may not have any notches left to tighten. He notes that economists from most South African banks have warned that the rate is likely to increase by at least 2% during the next two years. Says Goslett: “Considering the rising cost of utilities and food this will negatively impact the property market and affect consumer confidence.”
Samuel Seeff, chairman of Seeff Properties, expects a tough economy with poor growth, and rising costs and interest rates, as the general theme for this year. Says Seeff: “The economic landscape is further dominated by a potential downgrade of the country’s sovereign credit rating to junk status, something that will have a profound impact on the economy and property market.
“The economic challenges and headwinds notwithstanding, we are still seeing a resilient market. It is slowing, that it inevitable, but there is no disaster in sight and no need for buyers and sellers to panic. Our agents have for some time been preparing our clients – sellers and buyers alike – to factor in rising interest rates, a slowing in demand and general economic decline into their home selling and buying decisions.”
SURPRISE MOVE AFTER STRENGTHENING RAND AND FED RATE NEWS
Says Andrew Golding, CEO of Pam Golding Properties: “We had hoped the repo rate would remain stable, following the good news that the rand had strengthened since the last MPC meeting and that South Africa’s fiscal policy has tightened, taking some pressure off monetary policy.
“Coupled with this, on the global front the Federal Reserve Bank is not hiking rates as aggressively as initially anticipated and the European Central Bank continues to ease monetary policy.”
Golding notes that despite the fact that the country’s challenging economic pressures and fundamentals are not driving growth in the housing market, increasingly Pam Golding observes regional and area-specific demand being dependent on multiple factors including a convenient location, lifestyle, infrastructure and long-term investment potential.
“Although we are currently in an upward repo rate cycle, interest rates are still not near the highs experienced in 2008, and are not expected to increase significantly during the year,” says Golding. “So although housing activity in South Africa has slowed along with house price growth, the demand for homes remains strong and the market retains its resilience. This is further demonstrated by the market confidence shown by astute and experienced developers, who continue to bring new stock to market in high demand areas where uptake is brisk.”