Home buyers with mortgages or seeking credit will have greeted with relief the news that the Monetary Policy Committee meeting today (23 September 2015) announced its decision to keep the repo rate steady at six percent instead of implementing a further hike, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
“Many felt that the recent increase of 25 basis points implemented following the previous committee meeting in July was premature, especially given South Africa’s weak economic growth. With inflationary pressures stemming from external factors, including rand weakness, drought and state administered prices, a further interest rate hike would do little to contain these price pressures, but would rather negatively impact much-needed economic growth.
“For the housing market, another, immediate increase in the interest rate would in all likelihood dampen general consumer appetite for property acquisitions, notably those with higher debt, first time buyers aspiring to own their own homes and second home investment or leisure buyers.”
Dr Golding says of concern is the low level of economic confidence in general, as this is a key contributor to market sentiment. “With the US Federal Reserve Bank having held back on a rate hike at this stage, it is hoped this provides the SA Reserve Bank with leeway to keep the rate steady, at least for the remainder of 2015. What we do need is a kickstart for our economy to regain impetus and boost business and consumer confidence.
“While the recent interest rate increase will take some months for its impact to filter through and take effect, what we are currently seeing is a market which remains characterised by a shortage of stock and abundance of buyers and which has performed well for the year to date despite a range of economic challenges. Mirroring the trend of high demand and stock shortages, the rental market remains buoyant in all sectors and price segments across the country.”
He says while house price growth has slowed, it remains in positive territory relative to inflation, with pockets of significant growth such as the Cape Atlantic Seaboard which has achieved remarkable growth in excess of 20 percent over the past year.
“Of interest is that ooba reports that activity in the first-time buyer market has remained consistent with over 53 percent of their mortgage applications in August derived from this segment.”
