Guiding consumers since 2009

Repo rate stability a welcome reprieve in housing market

By Staff Writer
Nicolette Dirk, finance writer,
The decision by the Reserve Bank’s Monetary Policy Committee to retain the repo rate at 5, 5% last week is a welcome reprieve for the property market.
This is according to Seeff chairman, Samuel Seeff. 
“’For the first time in six years, we can confidently say that housing is in a growth phase and stability right now is more important than ever,” said Seeff.
Dr Andrew Golding, CEO of Pam Golding said that maintaining stability in the interest rate sends a positive message and reinforces much needed confidence among home buyers and investors.
“Coupled with this is the fact that mortgage lenders are demonstrating an increased appetite for lending, which is ultimately the most important driver of activity in our property market,” said Golding.
There are still causes for concern
But Golding said the Consumer Price Index (CPI) inflation edging upwards is of concern because it means consumers will still be burdened with rising food and fuel costs, as well as electricity, water and municipal rates and tariffs. All of which erodes disposable income. 
Golding said another concern is the extent to which the country’s GDP growth is lagging [behind] targets required for sustainable growth, which is necessary for the property market to prosper. 
According to Seeff, on the back of the continued sluggish economic growth and creeping inflation, a rate hike towards the third or fourth quarter of the year is probably unavoidable.
“Although a rate hike is unlikely to seriously dent the buoyant buyer activity, largely due to the pent-up demand that has been building over the last few years, it will affect the affordable, sub-R1, 5 million sector of the market,” said Seeff.
He added that while household debt on the whole has been coming down, a rate hike will most certainly see home loan affordability take a knock. It will also affect the ability of consumers to service their monthly debt, including their bond repayments.
“The knock-on effect on the basic cost of living with increases in the prices of food and transport will put further pressure on the already burdened household budgets. Consumers should focus on paying off their debts, put off on buying luxuries and save,” said Seeff.
Is it still a good idea to buy property now?
Despite the significant challenges, Seeff said the South African property market continues to show resilience and the ability to bounce back, albeit gradually. 
“Demand has been building for six years and many buyers have decided that now is as good a time as any to buy. For the first time in years, we are also beginning to see a gap between supply and demand develop in many areas including the top end of the market with stock shortages a real challenge,” said Seeff.
He added that the bond approval rates continue to improve and there are more cash buyers, willing to put their money into property.
“Despite the continued economic uncertainty, this should be a good year for property. News from the USA, UK and Europe, regarding their economic recovery, continues to be positive. What we need now are measures aimed at kick-starting our economic growth,” said Seeff.

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