How an unchanged interest rate impacts the commercial property sector
Yesterday the Reserve Bank’s Monetary Policy Committee (MPC) announced that the interest rate will remain unchanged at 6.75 percent. John Jack, CEO of Galetti Corporate Real Estate, believes that the decision by the MPC signals further stability in the property sector.
The announcement yesterday by the Reserve Bank governor to keep the repo rate unchanged shows that there is some stability in the economy which, as per the last MPC decision, will have a direct impact on the property sector and in particularly the commercial property market.
Movement post the elections
Leading up the elections the market was holding firm with very little movement. Now however, we are seeing far more activity and uptick as both investors and occupiers begin to move on decisions they were holding on while they waiting on the outcome of the elections. We believe that the outcome of the latest MPC meeting will give the market further confidence and so we can expect movement and trading to continue. It’s much-needed good news for the property market. Our office is now dealing with numerous queries that are coming in daily from investor and occupiers now eager to transact, where only two weeks ago there was very little activity.
Great opportunities for occupiers
We have seen a number of owner-occupiers returning to the market post-election which is positive given that the occupiers drive the market. Due to poor timing by many developers, there is currently plenty of available stock which has been held for sale, especially in the central Gauteng office market. Occupiers who are quick to move with cash available will scoop up these deals well before the market has time to re-adjust pricing. In certain circumstances we see sellers offering office buildings for sale in Sandton at up to 35% discounts to prices that would have been achieved 3 years ago. It’s an excellent occupiers market and today’s MPC decision will drive that even further.
The months ahead
We expect interest rates to remain stable for the balance of the year which will give further stability to the property sector. Investors will be watching the repo rate closely and so today’s decision will give them more confidence, which we are already witnessing.
Source: John Jack, CEO of Galetti Corporate Real Estate