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Cape Town - The holding of the repo rate at 7% by the SA Reserve Bank (SARB) brings relief to the real estate industry, and allows potential buyers and current bond holders to plan with more certainty over the next few months, according to Mike Greeff, CEO of Greeff Christie’s International Real Estates.
"The lower-than-expected inflation rate (5.3%) could leave room for a welcome rate cut by the end of the year," he said. Rates have stayed at their current figures for well over a year now.
"Affordability is currently an issue, particularly from the younger would-be first-time purchasers, who are struggling to enter the real estate market," explains Greeff. "For this sector specifically, a stable interest rate is vital."
Breathing space
Samuel Seeff, chair of the Seeff property group, said a flat interest rate and lower inflation gives more breathing space to consumers and home owners; it also allows buyers to benefit from a rate saving and get slightly bigger bonds.
"Although some areas are reporting increasing stock levels coming onto the market, combined with fewer buyers, the overall picture remains that of a still well-balanced property market. We have also not seen any drastic rise in distressed sales coming onto the market and anticipate stable conditions for the remainder of the year," said Seeff.
"Sales are however now taking longer and buyers, aware of the shifting market conditions, are more particular about the prices that they will pay - something that sellers need to be cognisant of."
Banks are still keen to lend but are taking a more conservative outlook and deals are taking longer to be approved.
Seeff added that when volatility creeps into the economy and property market, one begins to see area differences emerge. While Johannesburg is seeing a notable rise in stock levels and a drop in demand, Cape Town, by contrast, is still experiencing tight stock levels and continues to attract relatively higher activity levels and prices.
READ: Rates unchanged - we stay prepared for a bumpy ride, says economist
Market sentiment
Dr Andrew Golding, chief executive of the Pam Golding Property group, said a reduction in the repo rate would have provided a much-needed boost for consumer confidence and market sentiment, given the ongoing weak economic growth experienced in South Africa.
It would also provide added incentive for savvy first-time buyers wanting to gain a foothold on the property ladder.
“While we await the ratings announcement from Moody’s, the third major global ratings agency, and against the backdrop of volatile socio-political factors and slower national house price inflation, the residential property market overall, remains strongly resilient," said Golding.
“For home buyers and those who follow trends in the residential property market, the most common focal point is whether sales and values go up or down. Over the past few years the market has remained remarkably robust, given the poor performance of the economy and nationwide unrest over lack of service delivery and lack of jobs."
Throughout 2016 inflation was above the government’s upper target figure of 6%. While this exceeded the national house price inflation rate, certain sectors and regions continued to outperform inflation. The Western Cape regional market in general and Cape Town in particular, strongly outperformed inflation last year.
According to the latest Pam Golding Residential Property Index, Cape Town remains the top performing metro, followed by Nelson Mandela Bay, while house price inflation in both Johannesburg and Pretoria appears to be rebounding. “Semigration” to the coast seems to be underpinning coastal housing markets relative to non-coastal.
Cash-strapped households
Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, said while many cash-strapped households would have been happy to see the rate cut, there are still benefits to a stable interest rate.
He said the stable interest rate will assist potential home buyers to assess their affordability levels and financial readiness to enter the property market.
“It is fair to say that the interest rates will probably stay where they are for the remainder of the year, with a possible cut next year. The steady rates, along with the recent change in the transfer duty exemption to R900 000, should act as a catalyst in boosting the property market within the affordable housing sector – a sector that already outperforms all other sectors,” said Goslett.
About 56.36% of properties sold during the first quarter of this year were priced at R800 000 or below, bringing to light the high demand for housing within the more affordable pricing brackets.
