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Stable rate a breather for homeowners, buyers

Cape Town - While consumers are not in the clear quite yet, it seems that there are indications that the interest rate hiking cycle has run its course and is coming to an end in the near future.

If this is the case, it will be good news for bonded homeowners and prospective buyers who are eager to purchase a property next year, said Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.

At its last meeting of the year on Thursday, the Monetary Policy Committee (MPC) decided the repo rate will stay at 7%. The prime lending rate currently is at 10.5%.

“Even if there are no further rate hikes in the immediate future, poor economic growth, price pressure and job losses will continue to impact on the property market and more importantly consumer’s back pockets. Reducing debt levels and increasing savings will lift consumer confidence as we welcome in another year.”

Since January 2014 until March this year, rates have increased by a cumulative 200 basis points, compared to the previous hiking cycle where rates went up 400 basis points.

"There is still the chance that at least one more hike could be on the cards in the future, so consumers need to financially prepare where possible.”

Welcome reprieve

The decision to retain the repo rate at the current 7% for the fourth successive meeting is a welcome reprieve for the economy and housing market, said Samuel Seeff, chair of the Seeff Property Group.

"On the whole, we are still seeing and underlying resilience in the market and expect it to remain on solid ground into the early part of 2017. Ordinary consumers and home buyers are by and large now fairly sensitised to the economic outlook and rising costs. That said, caution remains the order of the day," said Seeff.

"The flat rate will certainly be a boost for the market and will allow buyers and home owners to benefit from the savings for a while longer. The sales will be important to keep the first and second quarter of next year in positive territory, given the slowing market and house price growth."

In his view the outlook for property remains positive for the time being though.

"Although weaker in terms of sales volumes and price growth - save for the Western Cape - the market is in a much better position compared to the post-2007/2008 downturn," he said.

"The market is still fairly balanced. Although stock levels have risen, we do not have the added burden of a flood of defaults and distressed sales that hampered the market in the 2009-2012 period."

Investor confidence

Dr Andrew Golding, chief executive of the Pam Golding Property group, said a stable repo rate reaffirms ongoing investor confidence in the residential property market, which continues to experience a groundswell of demand among a new generation of young or first time home buyers.

“While inflationary factors remain a concern, it is hoped that 2017 will herald modestly stronger economic growth, which will in turn have the effect of being slightly more supportive for the housing market," says Golding.

He said despite the economic and socio-political headwinds faced, SA is seeing significant private investment in various growth nodes across the country, including mixed-use developments in metro CBDs, private estates and shopping malls.

The stability maintained by the decision of the SA Reserve Bank's MPC to keep the interest rate unchanged should work in South Africa's favour when it comes to the verdict expected by ratings agency Moody's on Friday, says Bruce Swain, managing director of Leapfrog Property Group.

Harry Nicolaides, CEO of Century 21, said consumers are facing increased pressure on their pockets.

"This simply means that that they have less cash available to spend on property and may simply have to delay the purchasing of a new home  - whether they are first time buyers or buyers looking to sell their existing home and upgrade elsewhere," he said.

"However, Thursday’s interest rate decision does help in ensuring that consumers and property buyers don’t face increased pressure ahead of the festive season.”

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