Johannesburg - The Reserve Bank has probably cut
interest rates for the last time this year, which means it is time for
cautious or hesitant home buyers to take the leap and enter the market, said
Brian Falconer, CEO of Colliers Residential on Tuesday, in response to the
decision by the bank's Monetary Policy Committee to hold the interest rate
at 7%.
Falconer said since December R3 555 had been put back in the pockets
of bondholders for each R1m loaned.
This had reduced pressure on homeowners and pumped billions back into
the economy for discretionary spending rather than the servicing of debt.
"It is highly unlikely that this round of interest rate cuts will
continue this year," said Falconer.
"We should view this decision as signalling the end of eight months of
interest rate cuts, which means it won't get better, and potential investors
should no longer continue to defer their entry into the property market. We
don't see the market getting any easier than it is today."
The market has been sluggish for more than a year since it became
evident that South Africa was also entering the global recession triggered
by the US subprime crisis.
Buyers have not found sellers, sellers have been unable to obtain the
bonds they did two years ago, and the banks have been fearful to extend
credit given that the cause of the recession was related to property credit,
and due to the lack of liquidity in the market.
"There are very positive signs that the worst is over, so any further
procrastination would be unwise," added Falconer.
"We have noted that Standard Bank, for one, has relaxed its lending
criteria, and at least one other bank is advancing 100% loans for low-end
property."
Other positive signs, said Falconer, are:
- Globally the word is that the worst of the recession is over.
- Several US banks are reporting high levels of profitability.
- Albeit with government incentives, such as the Cash for Clunkers
initiative, the automotive market is starting to turn, both in the US and
Europe.
- Inflation is declining to just outside the Reserve Bank's target range.
- The oil price is relatively low, but volatile and likely to start climbing
ahead of a northern hemisphere winter.
- The rand has been strengthening ahead of the MTN-Bharti deal, and the gold
price has surged through $1 000 an ounce.
- South Africa's balance of payments remains positive, with inflows
sufficient to finance the deficit on the current account.
- There have been positive reports locally and abroad that the property
market is beginning to move.
- A number of market commentators have reported significant economic
recovery in a number of South African provinces.
Against this, said Falconer, are a few negatives.
The toxic debts behind the subprime crisis have yet to work their way
through the system, so a number of economic commentators have predicted what
is known as a "U-shaped bounce", where the recovery is short-lived as the
economic fundamentals have not changed.
"However, whatever the individual indicators, we are confident the worst
of the property market is over," said Falconer.
"If you continue to be uncertain or concerned, you could be missing out.
It's time to get back into the market."
- I-Net Bridge