The announcement that the Reserve Bank’s Monetary Policy Committee (MPC) will retain the repo rate at the current level of 6,50% (base home loan rate of 10%) is welcome news and a relief for the struggling economy and property market, says Stuart Manning, CEO for the Seeff Property Group.
Given the recessionary outlook, renewed currency volatility and inflation creep, economists were divided ahead of the decision and Manning warns that this is likely to be a short-term breather as a rate hike may well come sooner than hoped.
FNB’s property sector strategist John Loos warns the unchanged rate also means no stimulus for an economy already under pressure and only forecast to grow by 0.7% this year. Following this combination of a weak economy and a lack of rate cutting leads him to expect a continued trend in negative house price growth as well as rising capitalization rates and downward pressure on real commercial property values. Loos also says they expect rate hike possibly later this year.
Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa says the decision of the MPC will allow consumers time to lower their debts before the interest rates make their predicted climb.
“The MPC still warns that the inflation rate is too close to the top end of the Reserve Bank’s 3.0%–6.0% target range for 2018. The weak Rand, low investor confidence and continued fuel price hikes are putting inflation levels under pressure. Unless we experience a turn around that sees inflation rates lower over the course of the next few months, and considering that the decision was not unanimous with three MPC members in support of a hike and only four in favour of the decision for this meeting, it is likely that the MPC will raise interest rates at the coming meeting in November this year,” Goslett warns.
Excellent time to buy property
In the meantime, this decision should encourage buyers still sitting on the fence to get into the market, says Manning. “The flat interest rate, slow price growth, rise in property stock levels and positive bank lending landscape, makes it an excellent time to buy,” Manning said.
He continues that those concerned about expropriation, should take comfort from the important assurances given by president Cyril Ramaphosa in parliament and during meetings with the UK and China as well as agricultural bodies and stakeholders. “It is important to filter out the noise and misinformation and focus on facts,” says Manning. “It is still safe to invest in property. The president has been clear that there will be no wide-scale expropriation or nationalisation, property rights will be protected, and illegal land grabs will not be tolerated,” he says.
Read more here: How fears about land expropriation impact current property market
Manning also says the SA property market has seen worse conditions in the past.
The first-time home buyers sector of the market is demonstrating increasing appetite and activity, says Dr Andrew Golding, chief executive of the Pam Golding Property group. A recent report by ooba highlights that in August, over half (51%) of all their mortgages were extended to first-time buyers, transacting at an average price of R953 644 – a figure which is rising steadily. This is compared with a median price of R1 188 492 for all ooba-approved mortgages during the same period.
Says Dr Golding: “Further good news for home buyers is that ooba’s statistics for August reveal that the average deposit required by banks was slightly reduced, at 12.5% of the total purchase price.
“Given the fact that in the current economic climate consumers in general are cost-focused, price is crucial in the residential property market, so while South Africa does have a predominantly young population, one has to either rent or own a home, so there is a steady, underlying demand for housing.
Value for money a priority for home buyers
“Value for money is therefore a recurring theme for first-time and repeat buyers alike. Positively, in today’s market, there are a number of areas around the country which offer good value as well as the potential for sound capital appreciation over the medium to longer term,” said Golding and then lists the following areas as examples.
“Looking at the major metros, in the burgeoning East Rand, an area experiencing the strongest recovery among Gauteng metro markets, the best value for money is offered in areas such as Eastleigh in Edenvale, Beyerspark in Boksburg and Glen Marais in Kempton Park, where a standard three-bedroom, two-bathroom home with double garage can be had starting from around R1.7 million- R1.9 million up to R2.1 million/R2.2 million, while in the Benoni suburbs of Farrarmere and Rynfield, three-bedroom, two-bathroom homes with double garage go for between R2.2 million and R6 million. These are all high-demand areas, with the abovementioned homes generally single-storey and somewhat dated.
“In Randburg, there are a number of suburbs which offer significant value, such as Blairgowrie – due to its proximity to the Sandton hub and to the upmarket suburbs of Craighall and Parkview – where properties can be acquired for the late R1 millions to the early R2 millions. Another little-known suburb offering good value for money is Franklin Roosevelt Park, also due to its proximity to Sandton and Rosebank as well as the affordable, good government schools in the area.”
Dr Golding says in Johannesburg South, areas such as Meyersdal and Oakdene offer newly-built, value-for-money townhouse units with two bedrooms and one bathroom, ranging between R800 000 and R1.395 million, while in the Eye of Africa Lifestyle Estate, in the same price band, units comprise two bedrooms and two bathrooms. All these units cater for the millennial mindset and lifestyle.
“In the greater Fourways region, areas such as Pineslopes, Douglasdale and Northriding are seen as ideal for first-time buyers, with prices varying from suburb to suburb and spanning the price range from R720 000 for one-bedroom apartments, R850 000 to R900 000 for two bedrooms and from R1.25 million to R1.55 million for freestanding sectional title homes. In the areas of Midrand, Rivonia, Sunninghill and Morningside it is also still possible to acquire one or two-bedroom units at prices starting below R1 million.
“Meanwhile in Pretoria, the areas of Equestria, Moreleta Park and Mooikloof Ridge have high appeal for first-time buyers with residential property prices ranging from R850 000 to R1.5 million-R1.8 million.
“Forming part of eThekwini Metro in the suburb of Amanzimtoti on the outskirts of Durban in KwaZulu-Natal, a two-bedroom flat with single parking can be had from just R850 000 while a three- bedroom, two-bathroom residence of approximately 180sqm can be purchased from R1.25 million.
“In addition, certain parts of Glenwood and Morningside offer great value for money – you can pick up a three-bedroom, two-bathroom home anywhere from R1.1 million to just under R3 million for a more upmarket property.”
Dr Golding adds that in the Western Cape, Parklands on the West Coast – well-placed on the MyCiti bus route, is one of the fastest growing residential areas providing excellent value, with homes starting at R1.2 million for a two-bedroom home to R2.85 million for a five-bedroom house and sectional title units ideal for first-time buyers from an entry level price of only R600 000. In Burgundy Estate, between Cape Town and Durbanville Hills and 10 minutes from Century City, young, first-time buyers are flocking to buy sectional title units in the price range from R900 000 for a one-bedroom apartment to R1.5 million for two bedrooms and two bathrooms.”
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