Johannesburg - The SA Reserve Bank's decision not to raise interest rates may signal the beginning of a turnaround in the property market, industry representatives said on Thursday.
"While the decision will obviously not give any relief to homeowners who remain under financial pressure, it will certainly start to stem the tide of falling sentiment," said Jawitz Properties' chief executive Herschel Jawitz.
Recently, there had been some good news with a drop in the petrol price, no power outages and the possibility of a settlement in Zimbabwe, he added.
"This is a far cry from where we were four months ago. "
Aside from the financial factors such as interest rates and consumer prices, sentiment played a huge part in the residential market.
"We may be nearing the bottom of the property market - it's not certain when the turn will come, but at least we will have bottomed out."
The rate decision was "the first, but small, step toward a property market recovery," Jeanne van Jaarsveldt of Remax Properties said.
While expecting little effect on property sales, Van Jaarsveldt believed the bank's decision would "lift some of the clouds overhanging property sales" and introduce much needed rebuilding of confidence in property ownership, especially among investors.
"The coupling of still too high interest rates and tight credit restrictions will continue to hamstring first time buyers, but today's [Thursday's] news will smooth some investor fears, particularly adventurers in the lower end of the market in areas close to CBDs --where rental demand remains firm."
Another real estate company said the bank's decision signified the beginning of an economic turnaround and would have a significant impact on sentiment and the economy.
"This is momentous for both the economy and the man in the street," said Jenny Dugmore, director of Colliers Residential Real Estate in a statement.
The surge in food and oil prices, along with rand volatility, could not be addressed by increasing interest rates, she said.
Tipped the balance
While maintaining the fine balance between controlling consumer spending and ensuring economic growth was clearly a primary consideration for the government, the impact of the previous rate hikes was harming the economy.
"An additional rate hike would have potentially tipped the balance," Dugmore said.
It was unlikely that the Reserve Bank would reduce interest rates in the near future. While this might be uncomfortable for many it was in the national interest to control inflation, particularly during the current international market turmoil, she added.
The SARB's decision to keep the repo rate steady should have a positive impact on the property market, which had slowed down due to the credit squeeze and general market sentiment.
"Our property prices should remain static for the next year. This will effectively mean that with our current inflation rate, we will probably not see any real price growth over the next year.
"However, South Africa's economic stability and growth will continue to create job opportunities and thereby improve conditions for many people, creating new entrants to the property market," Dugmore said.
Second chance
But consumers are also warned to lock up their wallets and not embark on a spending spree in celebration of the rate decision.
Paul Beadle, managing director of www.justmoney.co.za, said hard pressed consumers should see the Reserve Bank's decision as a second chance for them to get their finances in order, not a sign that things are on the up and they can start spending again.
"There has been enormous pressure on Tito Mboweni not to put up interest rates again for fear that it will push even more people over the edge into over-indebtedness and insolvency. But the warning signs still remain, with the banks giving hints that they are suffering a growing number of defaulting loans."
Sapa and Fin24.com