By Nicolette Dirk
Last Thursday Gill Marcus, governor of the South African Reserve Bank, announced that given the global uncertainties and downside growth risks, the Monetary Policy Committee (MCP) decided to keep the repurchase rate unchanged at 5% per annum.
Andrew Golding, chief executive of the Pam Golding Property (PGP) group, welcomed the Bank’s decision to once again keep the rate unchanged.
“We remain optimistic regarding the remainder of 2013 and expect that interest rates will remain stable during this period.
Our view is that while the housing market continues to show signs of gradual recovery, underpinned by positive sentiment among home buyers, there are a number of factors impacting on the residential property market, including access to finance," said Golding.
He added that mortgage funding will continue to be less accessible and even with interest rates at historical lows, the market has not responded as it would have in the past.
“Buyers need substantial deposits and are staying in their properties for longer periods of time in order to accumulate equity in their current bonds before looking to relocate – and they need to invest more of their own money in property.
But South Africans are gradually becoming accustomed to the new market conditions and new way of purchasing property, which supports a sustained, steady, albeit slow recovery,” said Golding.
Will banks still lend home buyers money?
According to Gary Palmer, CEO of Paragon Lending Solutions, the unchanged rate will benefit consumers looking to buy property, but a lot depends on whether banks will have an appetite to lend.
“Because of South Africans’ high levels of debt and a flat market rate, it would not have been a good idea for the Reserve Bank to increase the current interest rate. But the low interest doesn’t help the current tight margins of banks,” said Palmer.
From a debt perspective, the low interest rate is good but Palmer warned that since Cabinet approved recommendations for credit amnesty
, banks will be more cautious when it comes to lending.
Should you still buy property?
Despite banks’ caution to lending, Palmer said the current low interest rates still makes it easier for the average person to enter the property market.
“With the low interest rate, it is a good time to buy property but consumers need to keep in mind that inflation is still increasing and our GDP is not growing as much,” said Palmer.
He added that people renting property should take note that despite electricity and rates increasing, they cannot always expect their tenants to bear the brunt of these price hikes.
“People who want to buy property should also consider whether they can afford the escalating cost of electricity and rates,” said Palmer.