DURBAN – The South African Reserve Bank Monetary Policy Committee’s (MPC's) increase in interest rates by 25 basis points is set to have an negative impact on the real estate industry.
Members of the property industry from Pam Golding Properties, Seeff Property Group and Jawitz Properties have commented on the how the increased interest effects the industry.
Andrew Golding, Chief Executive of Pam Golding
The final outcome of the Monetary Policy Committee’s earnest deliberations this week is what matters, and for homeowners and aspirant home buyers,
Indeed, the current recovery in the Rand, coupled with the recent slump in the oil price, suggest that the local inflation outlook has improved somewhat, potentially easing pressure on the MPC to begin hiking interest rates in the near-term.
A pause in the repo rate cycle would have helped stimulate economic confidence and provided some relief to consumers – particularly at a time of year when many are looking ahead to the holidays.
Clearly, however, there are still inflation risks which may incline the MPC towards continuing on a modest hiking cycle in the New Year, particularly as the rand remains vulnerable. It would thus be wise for home buyers to factor this in along with the other costs associated with acquiring residential property.
On a positive note, we continue to see pockets of robust and also renewed activity in the housing market. Pam Golding Properties is seeing an uptick in sales in areas of Cape Town, Gauteng and in KwaZulu-Natal.
A notable trend in regard to sales in areas offering accessibly priced homes weighting towards buyers up to approximately 35 years of age.
Stuart Manning, Chief Executive for the Seeff Property Group
Home owners and buyers will need to continue tightening their belts as the interest rate climbs and the economic and property market recovery takes longer than hoped, says Stuart Manning, Chief Executive for the Seeff Property Group.
We had hoped for a stay though and Manning says that despite further inflation creep to 5.1% (although still within the 3%-6% target range), there was still reason to hope for a stay ahead of the festive season which could bring a much needed economic boost.
Nonetheless, even with this hike, the interest rate is still at some of the best levels in years and the Seeff Group does not expect much of an impact on the property market. The bigger impact is coming from the socio-economic environment and only once some these are resolved are we likely to see the next upward phase, he says.
While we are looking forward to a much improved 2019, the reality is that with the General Election scheduled for May, it is likely that any uptick will only really be seen from around mid-2019.
Once the May General Election is out of the way and if we get a positive result that reinforces a mandate to President Ramaphosa to continue his reforms, we will see this translate into more positive sentiment, so critical for the economy and property market.
Recent successes with his investment drive adds further to the positive outlook.
Conditions remain favourable for buyers who are able to find good value given the flat price growth and rising stock levels, but don’t wait too long.
While price growth has flattened, there has been no price devaluation yet and it is still safe to invest in property, he concludes.
Herschel Jawitz, Jawitz Properties
The decision to increase rates was not unexpected given that the latest Consumer Price Index (CPI) measure stands at 5.1%, which is in line with expectations. The Reserve Bank has been trying to balance its inflation mandate with a subdued economy.
The biggest challenge is that virtually all the pressure on inflation is supply driven, such as the weak exchange rate and increased cost of fuel. There is zero demand pressure on inflation.
This extends to rental inflation which is part of the basket of goods and services used to determine the CPI numbers. The increase in rates will continue to contribute to a subdued residential market from a demand point of view. With inflation at 5.1%, property prices will continue to decline in real terms after inflation across most parts of the country which means that the current residential market offers the best value to buyers since the market crash in 2009 - for those buyers who wish to get into the market.
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