Home Loan Rate Remains Unchanged at 10.25%

Unchanged Repo Rate Positive, While Buyers Gradually Return to the Market

After an unexpectedly tough 2018, but with the welcome announcement that the repo rate remains unchanged following this first MPC meeting of the year, the outlook for 2019 is somewhat brighter. Nonetheless, the year ahead is likely to be characterised by a number of highly significant events which could substantially impact the performance of the local residential property market, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

“Apart from the repo rate holding steady, providing encouragement for home buyers with mortgages, in the short-term there have been a number of positive developments. These include the prospect of a third petrol price cut in early-February, following cumulative cuts of R3 per litre in December and January, renewed Rand strength helping to dampen inflationary pressures and the Reserve Bank thus seemingly under little pressure to raise interest rates again. Some analysts even believe the MPC may wait until late-2019 or possibly early-2020 before raising interest rates again. While economic growth is likely to remain below 2% this year, it is still expected to be about double the dismal 0.7% recorded in 2018.

“Locally, economic and residential activity appears to be rebounding modestly as buyers capitalise on sound buying opportunities in the current environment. While the ‘sweet spot’ in the residential property market continues to be the price range up to approximately R5 million or R6 million, we are seeing more buyers in the marketplace than a couple of months ago – most notably in high-demand nodes which include Hyde Park, Pretoria and the burgeoning KZN North Coast, for example.

“These are areas which have seen significantly improved activity in December 2018 compared with the same period in 2017, with uMhlanga even turning in record sales turnover during this period. In addition, our Pretoria region reports that development sales in mixed-use developments have also surprised on the upside over the past three to six months.”

Dr Golding says KZN is priced well and well positioned from a commuting perspective and therefore still experiencing semigration, Gauteng is showing good activity largely because it remains the financial hub of the country and attracts the upwardly-mobile, career-minded home buyer, while Pretoria and surrounds are active as people invest in precincts such as Menlyn Maine, which offers attractive and convenient, lifestyle living.

“In fact, generally, there seem to be more buyers around than a couple of months ago, with the perception of property ownership as the basic cornerstone of wealth creation still holding good, particularly for a groundswell of aspirant first-time buyers gaining a foothold in the market. From an affordability perspective, cash buyers are more opportunistic as they seek out good buys, while coastal areas are still regarded as a lifestyle choice by purchasers flush with cash.

“However, these positive factors are tempered by the fact that buyers are price-sensitive in the current market, with many investors and property buyers adopting a wait and see approach in the lead-up to the 2019/20 Budget and the general election (expected in May 2019). Not only will the results of both these events influence local business and consumer confidence, but also the likelihood of South Africa keeping or losing its investment grade rating from Moody’s.

“Should the economic recovery and/or political environment lean towards the upside, South Africa may well retain its investment grade rating and the outlook for the local housing market will improve. However, any disappointments on these fronts could see Moody’s downgrade South Africa – which would weigh on confidence, batter the Rand and increase the risks of a deterioration in the economic outlook and hence the local housing market.

“The market consensus appears to be that activity will remain relatively muted this year, but fairly resilient nonetheless, and that growth in prices will remain in the low single digits – in all likelihood below the prevailing consumer inflation rate, suggesting that prices will decline in real terms. However, there are still pockets of growth, and an understanding of prevailing market trends is required to ensure a sound investment when purchasing a home.

“As always, when the housing market is booming, almost all towns and suburbs flourish – although to varying degrees depending on their own unique set of market dynamics. In a muted market, such as currently experienced, opportunities for the savvy investor present themselves, typically, for example, those looking for a long-term property investment in prime locations such as the sought-after Cape Atlantic Seaboard, an area which offers not only some of the most appealing and scenically beautiful locations but also a compelling lifestyle proposition.”

Dr Golding notes that the V&A Waterfront in particular continues to flourish, with sales to out of town buyers, downsizers and some international buyers. Conditions here remain buoyant. So too on the Western Seaboard, where sales activity has slowed somewhat in recent years but prices continue to rise.

“Interestingly, buyers in the Western Seaboard are generally young – with the largest age cohort typically those 35 years or younger. This suggests that first-time buyers are looking beyond the traditional suburbs for more affordable areas.

“Looking at international impacts, so far in 2019 the rand has been supported by the prospect of US interest rates rising at a more gradual pace, which is fuelling investors’ risk appetite for emerging market assets – including those in South Africa.

“We believe that 2019 holds much promise, as elections and a positive result will drive sentiment and improve the economic outlook. Foreign investment is on standby and all things being equal we will see an increase in activity, given that we are a favoured world emerging market. If this occurs, the local property market will start to see significant improvements in activity.”

SOURCE: Pam Golding

Interest Rate News Good, Time to Get on with Rebuilding the Economy

Following the November rate hike, the Seeff Property Group has welcomed the decision to keep the interest rate on hold as the right decision. We need stability so that we can get on with rebuilding confidence and the economy, says Samuel Seeff, chairman of the group.

This follows the Reserve Bank’s Monetary Policy Committee (MPC) decision to retain the repo rate at 6,75% (base home loan rate at 10.25%).

Seeff says this is a “year of great expectation” and the decision to retain the rate is the right one. Although inflation is a concern, it is weighted by the reasonably stable rand, declining fuel price, and Moody’s keeping the sovereign credit rating and outlook stable with a gradual strengthening of institutions and increasing transparency.

While we look forward to a much improved year, the reality remains a sluggish economy and we therefore simply cannot afford any further shocks for the economy, he says.

Stability and a return to confidence is now vital. He adds further that the general sense is that once the May Election is out of the way and delivers a positive mandate for President Ramaphosa, and barring any further shocks, the economy and property market could start lifting more meaningfully by mid-year.

In the meantime, it remains business as usual for the “have to buy and have to sell” residential sector in the price band up to R1m-R1.5m to around R3m depending on the area. These buyers and sellers need to transact for various reasons, and buoyed by the fairly benign interest rate, this sector will continue ticking over despite sentiment. Here, well-priced properties can still sell within a reasonable timeframe, he says.

Given that the fundamentals in the property market will remain weak during the first half of the year with subdued demand, longer sales cycles and flat price growth, sellers, especially in the higher price categories will need to make their price attractive to catch the attention of buyers who have a lot more to choose from.

That said, there are always neighbourhood and regional variations and it’s best to work with a local area expert who understands the dynamics of your local market. While we expect the market to improve, there are no guarantees, so take care not to hold back on accepting a good offer, especially if you are looking to buy right now.


Mpc Announces Interest Rates Will Remain Unchanged

Some good news to start the year off as the Monetary Policy Committee (MPC) announced today that interest rates will remain unchanged. The prime lending rate therefore remains at 10.25% and the repo rate at 6.75%.

“South Africans should celebrate this small victory by doing what they can to pay off their pre-existing debts as aggressively as possible while interest rates remain stable,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.

For those hoping to enter the property market, Goslett advises that they leave room in their budget for the possibility of higher instalments on their home loan should the MPC choose to announce interest rate hikes at further meetings in 2019.

“For those who are delaying entering the market owing to the possibility of interest rate hikes, I would advise that they reconsider. Over the course of a twenty or thirty year loan term, interest rate changes are inevitable and cannot be avoided. Much like annual rent increases, interest rate hikes are simply part of the risk of owning property. Waiting for ideal market conditions will delay your plans of entering the market, thereby delaying the time it will take for you to pay off your home loan and minimalizing the time you’ll have living in or renting out a property debt free and reaping the rewards of your investment,” says Goslett.

Goslett also reminds South Africans that now is the perfect time for investors to enter the market. “Owing to the upcoming election period, the property market in general is likely to be off to a slower start in the first half of the year. If things continue to go favourably for our country, the property market might well shift into a seller’s market towards the end of the year, lessening the opportunities for buyers to pick up a good deal,” Goslett concludes.





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