Dr Andrew Golding, chief executive of the Pam Golding Property group.
Photo: Supplied
Dr Andrew Golding, chief executive of the Pam Golding Property group. Photo: Supplied

Timeous decision in the reduction of the repo rate

By Andrew Golding Time of article published Mar 19, 2020

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DURBAN - Against the backdrop of the unprecedented times we find ourselves in, the decision by the Monetary Policy Committee to reduce the repo rate by 100bps is a critical step towards financial survival, as consumers and our economy navigate unchartered territory and unexpected new challenges as a result of the onset of the coronavirus, said Dr Andrew Golding, chief executive of the Pam Golding Property group.

The ensuing reduction in the interest rate, coupled with next month’s (April) likely substantial drop in the fuel price as a result of the dramatic reduction in global oil prices - despite the additional 25c a litre tariff increase as announced in the recent National Budget, affords some relief to South African consumers and hopefully part of the boost our economy needs right now.

Given the extreme volatility currently being experienced in global stock markets, it is probable that, as has been seen over decades in times of great turmoil, we will see increased confidence in bricks and mortar among investors and home buyers.

As property has over the longer term proven a sound investment, it stands to reason that many will regard the residential property market as a safe haven amid the heightened economic uncertainty caused by a global pandemic.

Looking at the recent past, according to the Pam Golding Residential Property Index, while national house price inflation continues to slow – to 1.95 percent in February 2020, house price inflation in Gauteng appears to be stabilising at 1.91 percent while both the Western Cape and KwaZulu-Natal housing markets continue to rebound at 5.36 percent and 3.12 percent respectively.

Positively, says Dr Golding, and on the back of the adjustment in the transfer duty threshold for zero payable on homes up to R1 million, the percentage of home loans extended via ooba to first-time buyers rose to 52 percent in February (2020), the fourth consecutive month this has exceeded 50 percent.

Furthermore, 60 percent of all applications received by ooba are from buyers with no deposit, with four out of five buyers successful in their bid to secure a 100 percent bond. On average, mortgages facilitated by ooba accounted for 89.6 percent of loan value in February, the highest percentage on record (since 2007). In addition, loans extended for holiday homes recovered further last month (0.3 percent), while mortgages for investment properties rebounded to 7 percent of all mortgages facilitated by ooba from a weak January 2020.

But all of this may be academic as we head into the unchartered territory of a coronavirus affected world and where we will have to see its effects on the property market both in short and medium term as it unfolds.

The Reserve Bank will undoubtedly continue to closely monitor developments in the local economy, and will presumably stand ready to cut interest rates further should the need arise.

Dr Andrew Golding is the chief executive of the Pam Golding Property group.

BUSINESS REPORT

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