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Make most of stable interest rate - property experts

Nov 24 2017 06:00
Carin Smith

Cape Town - The decision by the monetary policy committee (MPC) of the SA Reserve Bank to leave the repo rate unchanged at 6.75% brings some good news, particularly for cash-strapped homeowners, Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, said on Thursday.

He advised homeowners to take the opportunity to make the most of the period of interest rate stability.  

“Homeowners and potential future buyers should focus on curbing unnecessary spending and starting a savings plan of some kind. Often during low-interest rate cycles, consumers are tempted to take on high-risk investment or debt and are discouraged from saving," explained Goslett.

"However, where possible, consumers should use this time to create a financial contingency plan.”
 
With the expected increases in electricity tariffs during 2018, consumers should make the most of the favourable interest rates and pay down their debt where possible, according to Goslett.

Home ownership

According to Dr Andrew Golding, chief executive of the Pam Golding Property Group (PGP), the housing market continues to reflect a sustained appetite for home ownership. This is particularly the case in the major metros and conveniently located, high demand nodes – close to schools, the workplace and all amenities.

At the same time, he pointed out that cash-strapped consumers could well do with a reduction in their mortgage bond repayments.

"Although at this stage it appears that an interest rate reduction is most likely not on the cards for the foreseeable future, we remain of the view that a further, meaningful cut would go a long way toward alleviating economic pressure on consumers, bolstering investor and business confidence, and act as a stimulus for the residential property market," said Golding.

Leapfrog Property Group also welcomed the MPC decision to maintain the repo rate at 6.75% in light of the upcoming ANC leadership election meeting in December, a likely petrol increase in December as well as a weak employment outlook and low consumer confidence.

“However, notwithstanding political uncertainty and economic challenges, we recommend that buyers don’t delay purchasing property [especially in the major metros], as demand, particularly in the under-R2m price range, continues to grow,” said Bruce Swain, CEO of Leapfrog Property Group.

Slight drop

Samuel Seeff, chair of the Seeff Property Group, thinks a slight drop in the repo rate could have been a welcome boost for the retail sector ahead of the busy festive season - especially since inflation dipped slightly to 4.8%.
 
Seeff, however, cautioned property stakeholders that SARB's decision to keep rates unchanged underscores the challenges faced by the economy and which directly impacts the property market.
 
Home owners, buyers and consumers will have to be astute with their finances and belt tightening will be the order of the day, according to Seeff.
 
"Although the property market has shifted and we are entering 2018 with a buyer’s market for most areas, regardless of the state of the economy, there is opportunity in every market," said Seeff.
 
"The softened price growth and flat interest rate makes it a good time to buy, especially if it is your primary home."

Mike Greeff, CEO of Greeff Christie's International Real Estate, said while the SA Reserve Bank has left repo rates unchanged, South Africa's credit ratings drop will have some negative effects on the economy.

"Prospective buyers may find it difficult to obtain credit in the form of bonds or home loans. Prospective buyers should not be despondent though. Banks are still lending provided that lending criteria can be met," said Greeff.

"While foreign businesses may be hesitant to see South Africa as an investment haven, a credit downgrade will see a weakening of the rand. This in turn means that foreign buyers will get more value for money when investing in South African Property."
 
The Western Cape, however, continues to buck the trend with property values unlikely to drop due to high demand and stock shortages, in his view.

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sarb  |  interest rates  |  sa economy  |  repo rate  |  property

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