Base Interest Rate Unchanged at 10.25% – Property Industry Predicts The Scenarios

A unanimous decision on the repo rate and base interest was announced by central reserve bank governor, Lesetja Kganyago on Thursday 28 March. The property industry has weighed in on their views:
The decision by the Monetary Policy Committee (MPC) of the Reserve Bank to keep the repo rate unchanged at 6,75% (base home loan rate at 10.25%) is welcome news for the property market, but not likely to make an impact on the struggling SA economy. The property industry weighed in with their predictions:
Seeff Properties – No rate hike, welcome relief, but likely short lived
Seeff says that although the group remains upbeat about the economic outlook for the year ahead, it would be remiss not to caution that economic and property market recovery will take time. The renewed Eskom crisis has again reminded that the economic and governance challenges are deeper than anticipated when President Ramaphosa took the reins last year.


While the CPI rate at 4.1% as at February is still within the 4%-6% target range of the Reserve Bank, Seeff says that as noted above, it may well rise in the coming months due to the Eskom fall-out. Combined with renewed volatility in the currency, we may well again be back in an interest rate hiking cycle sooner than what we had hoped for.


Sellers on the other hand, need to continue focusing on their asking prices, especially at the higher price levels where we see a discretionary market in operation, continues Seeff. The latest FNB Price Index shows that price growth has declined further since the start of the year and now stands at around 3.7%, down from 4% in January and 3.9% for 2018. At the same time, the bank’s valuers report that property stock levels continue rising, resulting in a deteriorating demand-supply balance.


In a climate of fewer buyers and notably more properties to choose from, serious sellers need to focus on listing with credible agents who will give you the best advice rather than waste your time with low commission or high price promises, says Seeff.

Pam Golding Properties – Stable repo rate underpins ongoing resilience of residential property market

With inflation currently below the mid-point of the Reserve Bank’s inflation target and economic growth remaining sluggish, the Monetary Policy Committee kept the repo rate steady at 6.75%, as expected. This decision is a positive outcome for many consumers, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

“With the jury still out, when Moody’s makes its announcement regarding South Africa’s credit rating status, the repo rate decision was welcome. However, some would argue that the tepid economic growth rate and lower inflation of only 4.1% year-on-year in February, indicated that the case could have been made to rather reduce the repo rate.

“For first-time and other buyers seeking finance to acquire residential property, the stable and still relatively low interest rate provides further incentive to commit to investment decisions, and thereby provide further stimulus and impetus for the property market.

“In fact, the residential market continues to reflect surprising resilience despite the fact that some are awaiting the outcome of the election in May. However, with market conditions currently favouring buyers, others are pressing ahead, in particular young families and singles eager to gain their foothold on the first rung of the property ladder, or put down roots in locations where they can raise their children in a more carefree environment.

RE/MAX – Good News for Housing Market  

“The decision to keep interest rates unchanged is a relief for South Africans, as well as for the state of the South African housing market. With ongoing concerns surrounding our national power utility, rising international fuel costs, and a weakening Rand, an interest rate hike at this time would have pinched consumers even further, stifling the possibility for economic growth and slowing the initial house price correction we’ve seen since the beginning of this year,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.

Goslett therefore encourages buyers to enter the market as soon as possible before prices begin their upward climb. “Following the elections in May, it is possible that the property market could begin a gradual shift into a seller’s market over time, lessening the opportunities for buyers to pick up a good deal.

Beyond this, should inflation continue to rise and the MPC should later decide to raise interest rates, buyers who get into the property market early will have bought themselves a few months of lower bond repayments in the early years of their bond’s lifespan where the majority of your monthly instalment goes towards paying off interest,” Goslett concludes.

Betterbond – Make the most of static rates and buy property before Election
The decision follows news this week that the consumer inflation rate is currently holding at much lower levels than in 2018 (4,1% in February) despite the recent fuel price increases, and that employment increased by 158 000 or 1,6% year-on-year between December 2017 and December 2018.


“In addition, the economy grew by 1,4% in the fourth quarter of 2018 and 0,8% in 2018, and the Bank is hoping this trend will continue, resulting in GDP growth for 2019 of 1,3%,” he notes.


“However, household expenditure is currently declining, so static interest rates are needed to support growth – and will also offset the pressure on households resulting from the further fuel price and levy increases expected this year, and the 9,4% hike in electricity tariffs which Nersa recently granted to Eskom.


“Stable rates will hopefully also encourage existing homeowners to pay more than the minimum home loan instalment every month and get their properties paid off in far less than 20 years.”


As for prospective home buyers, Botha says, now’s the time to urgently seek bond pre-approval and make a move, whether it’s to upgrade or to purchase a first home.“The reason is that property prices are expected to start escalating more rapidly after the Elections and that this is going to make it more difficult for them to qualify for a bond.


“At the moment, however, buyers have an advantage because the banks are keen to lend to them and we are there to help them secure a bond at the lowest possible rate through our multi-lender application process.”


“Currently, the average variation between the best and worst interest rate offered on a bond application is 0,5%, and on a 20-year bond of R1,5m, for example, that translates into potential savings of more than R120 000 over the lifetime of the bond, as well as a total of about R6000 a year off the monthly bond instalments – at no cost for our service.”



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