Interest Rates on hold, good news for economy and property market

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Cash-strapped homeowners with mortgages, who are faced with inexorably rising consumer costs across the board, will be relieved at the decision to keep the repo rate steady. Cash-strapped homeowners with mortgages, who are faced with inexorably rising consumer costs across the board, will be relieved at the decision to keep the repo rate steady.

South Africans have welcomed the decision by the Monetary Policy Committee of the South African Reserve Bank to retain the repo rate at 7%, making it easier for real estate business to prosper.

The prime lending interest rate, the figure charged by banks to customers, will remain at 10.5 percent.

It’s been a tough year for home owners as the repo rate has increased twice in 2016 to 7% while municipal rates, electricity and food prices have gone up.

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Conversely economic growth has slowed down to -1.2% in the first quarter of 2016. “Based on the current situation that’s putting financial pressure on the average home owner, we welcome the SARB’s Monetary Policy Committee decision to maintain the repo rate for the next three months”, says Bruce Swain, MD of Leapfrog Property Group.

Cash-strapped homeowners with mortgages, who are faced with inexorably rising consumer costs across the board, will be relieved at the decision to keep the repo rate steady, says Dr Andrew Golding, CE of the Pam Golding Property group.

Seeff chairman, Samuel Seeff says that while the latest inflation data showed a slight upward trend (up from 6.1% in May to 6.25%), there is no compelling case for a further rate hike right now.

An upward rate adjustment would add to the already negative economic sentiment and will most certainly serve as a dampener on the economy and property market. Consumers are already burdened with rising prices and we are not seeing any overspending, so there is no real reason for a rate hike.

Stability and a positive outlook, says Seeff, is what is now needed for the economy and country.

While the property market remains on a fairly even keel compared to last year, the energy has been taken out of the market.

Mortgage originator, Ooba, has also reported a slow-down in bond applications although the banks are still keen to lend to qualifying buyers.

“Against the backdrop of a sharp spike in global political and economic uncertainty, including fallout from Brexit, comparably, South Africa’s outlook is encouraging. Just this week Bloomberg reported an inflow of investment of a record R85.7 billion in the country’s stocks and government bonds in June – a trend which has continued in July,” says Golding.

He says despite economic pressures, South Africa’s housing market continues to reflect an ongoing demand for homes to buy and rent, with stock shortages still evident in sought after hubs and growth nodes.

Dr Golding says there is no doubt that an increasing focus on smaller, more affordable and conveniently located residential accommodation will continue to fuel the demand for sectional title living, whether for investment, primary residential use or to rent.

The winter months have been a bit slower than what we had hoped for, but we now start looking forward to the approaching summer months and traditionally busier periods for the market, says Seef.

Read more on:

Consumer Price Index (CPI)  |  Repo Rate  |  Samuel Seeff  |  Dr Andrew Golding  |  South African Reserve Bank  |  Brexit  |  Bruce Swain
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