“SARB’s Monetary Policy Committee’s decision to leave the Repurchase Rate unchanged comes as a relief to the property industry,” says Mike Greeff, CEO of Greeff Properties, Christie’s International Real Estate.
“It’s interesting to note that at the current rate of 7.0% p.a, the Repo Rate is still below 9.1% p.a. – the average since 1994,” says Greeff. “This may be cold comfort for those paying back bonds, but it is also a strong indicator that the rates still have space to increase and any extra Rands and Cents should be channeled into your bond to try and reduce the interest amount,” adds Greeff. “Economic experts predict that according to South African Forward Rate Agreements, the market is expecting interest rate increases of 0.50% over the next three months, and the probability of this occurring is around 52%. Increases of 1% over the next twelve months are expected to be 80% probable,” reports Greeff. “While inflation is very likely to carry on breaching the Reserve Bank’s upper limits and household disposable incomes will be further squeezed, we expect property prices to remain buoyant in the Western Cape,” says Greeff. “The province is, according to The FNB Property Barometer, the only major region to show a house price growth acceleration, while all the other provinces measured are experiencing a slowing pace of growth,” adds Greeff.
“The FNB Western Cape House Price Index for the first quarter of 2016 rose 12 percent year-on- year, and this was two percent higher than that recorded in the last quarter of 2015,” reports Greeff.
He is of the opinion though, that in spite of the inevitability of belt tightening, the allure of the Western Cape with superior offerings for homeowners remains a constant. “John Loos predicts that out of all the provinces, The Western Cape may well show the strongest long-term economic growth rates,” says Greeff. “Loos also stresses other positive factors including: A perception of good provincial and Cape Town Metro management, a good lifestyle and a strong service dominated economy that provides steadily improving business and employment opportunity.”
“The increasing Repo Rate will however frustrate would-be first-time buyers, rendering the Western Cape, in particular less affordable. It is currently not as affordable as other provinces. In all likelihood, first-time buyers will look for properties in other regions, particularly Gauteng,” says Greeff.