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Flat repo rate good news for property market

By Carin Smith

Property experts welcomed the unchanged repo rate as good news for consumers and property owners, especially those with mortgage bonds.

Stuart Manning, CEO of the Seeff Property Group commented on the SA Reserve Bank’s (SARB) Monetary Policy Committee (MPC) decision on Thursday to keep interest rates at 6.5%. The base home loan rate stays the same at 10%.

Manning said the MPC’s move was largely anticipated by the market given the better than expected consumer inflation figure of 4.6% for June, despite the weaker exchange rate.

He added that aside from the economic pressure, the “political noise” and policy uncertainty around land expropriation remains a concern for the property market. It has made many buyers, especially at the top end of the market and those who do not have to buy right now, hesitant – both local and foreign buyers alike.

The property market is holding up well despite the economic challenges, and while slower, there is still price growth and plenty of reasons to buy, he explained. Many areas are seeing excellent trade with especially the lower to mid-market sectors being quite active.

“Many sellers are still making good deals as they adapt to the changing conditions. They may not be seeing stellar profits, but they are still making money,” he said.

“When the sales side of the property market scale tips and finances are under pressure, the rental side of the market tends to go up with more demand for rental property.”

Regional picture

According to the Pam Golding Residential Property Index, national house price inflation of 4.54% in June is up from 4.04% in January – marginally higher than the first six months of the year’s average house price inflation of 4.25%.

“With household finances under pressure and a young population, we have already seen the lower end of the housing market experience an uptick, particularly as the average price for first-time buyers is estimated by ooba at R939 000,” commented Dr Andrew Golding, chief executive of the Pam Golding Property group.

“We are seeing countrywide in relation to Pam Golding Properties’ sales, that well-priced homes under approximately R2.5m are selling well to a cross-section of buyers, including investors,” he said.

“There is more activity in the middle to lower price bands, with the luxury market still ticking over steadily.”

The housing market in Gauteng is showing signs of recovery, “particularly in the North” and in Pretoria, according to Golding.

As for Durban and the North Coast regions of KwaZulu-Natal (KZN) and the Eastern Cape coastal regions, he said Lightstone statistics reveal that the coastal metro housing markets – defined as being within 500m of the coastline – are continuing to outperform non-coastal markets.

As a region KZN is also benefiting from home buyers relocating from upcountry and because of its climate, from a growing retirement market.

“While the Cape Town metro market is slowing, this was to be expected as activity here has run ahead of the prevailing economic conditions and it makes sense for the market to consolidate after several years of above average price growth,” said Golding.

“Certainly, the drought also impacted on the housing market and this is currently coupled with the fact that winter seasonal demand is traditionally slower in the Western Cape, but we believe these are temporary concerns.”

People seem to be looking a little further out from the Cape Town Metro towards areas such as the Northern Suburbs, with its value-for-money homes, good schools and appealing environment. Homes in secure estates remain in demand.

“We expect the effect of the fuel price increases to further impact on consumers’ desire to reduce commutes and live as close to the workplace as possible, and with increasingly sophisticated digital technology and many employers offering flexible working hours, increasingly work from home,” said Golding.

He also expects the trend of multi-generational living to gain further impetus.

In his view, there is an opportunity for developers in popular hubs and major centres to bring to market new, affordable stock particularly in the price band below R1.5m, and Pam Golding Properties is already noting the beginnings of this trend as developers respond to the growing demand for sectional title properties.

Right approach

Mike Greeff, CEO of Greeff Christies International Real Estate, is positive about the latest MPC decision.

“The prime lending rate sets the tone for the property industry and suggests that the government is satisfied with the current trajectory of the economy and is adopting a ‘wait and see’ approach with regard to global economic factors,” said Greeff.

“With the correct attitude towards their finances and responsible credit management, there is no reason why individuals would not qualify for a bond or home finance as banks have eased conditions for granting bonds.”

Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, said a rate cut at this point would have done well to stimulate the SA economy and help struggling consumers.

He suggested that consumers pay off as much of their short-term debts as possible while interest rates remain stable, especially now that the MPC has announced that interest rates are likely to be raised by 25 basis points in subsequent meetings this year.

“Now is also the ideal time to enter the market and purchase property before interest rates on your home loan increases,” Goslett said.

This is a Fin24 article and is reprinted here with permission from Fin24 editor Fadia Salie. The article was originally published on 19 July 2018 under the headline ‘SARB rate decision good news for property market – expert’.

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