While welcomed, the announcement that the repo rate will remain unchanged will not be enough to stop the property market from continuing on its weakening path, experts say.
FNB property economist John Loos says it would have required a rate cutting stimulus to end the gradual decline in real property values that are underway. Stuart Manning, CEO for the Seeff Property Group, says given the recessionary outlook, renewed currency volatility and inflation creep, the announcement by the Reserve Bank’s Monetary Policy Committee (MPC) that it will retain the repo rate at the current level of 6,50%, is only likely to be a short-term breather as a rate hike may well come sooner than hoped.
Loos further warned that the combination of the ongoing economic weakness and sideways movement in interest rates could cause the consumer to become “still more cautious with spending habits”.
This could also likely further increase in the average time of homes of the market from the 16 weeks and 4 days estimated average as per the FNB Estate Agent Survey.
“We have already seen signs of the decline in the form of less selling of homes in order to upgrade, a greater portion of financially pressured sellers opting for rental as opposed to buying, and a slowing pace of non-essential secondary home buying.”
Regional director and CEO of Re/Max of Southern Africa, Adrian Goslett also warns of a possible interest rate climb over the next few months and advises homeowners to make room in their budgets for this as it would increase the instalments on their home loans just before the December holidays.
“If interest rates remain unchanged for the rest of the year, they will still be rewarded for their frugal living by having some money set aside for the Christmas season,” Goslett says.
Manning says the flat interest rate, slow price growth, rise in property stock levels and positive bank lending landscape, does however make it a good time to buy.
He added that, although slower, the property market is nowhere near the worst levels of the 2008 Global Financial Crisis.
Mike Greeff, CEO of Greeff Christies International Real Estate, agreed the current buyer’s market “enables buyers to better negotiate with sellers on the price of properties”.
“With the recession a reality, the government has taken the conscious decision to avoid straining consumers even further than they are currently and will be positive in helping people maintain their current bond repayments.
“South Africa is heavily dependent on foreign cash flow and any failure to curb inflation is seen as a government failure by foreign investors. A lack of investor confidence has a negative knock-on effect in every other sector of the South African economy.
“The real estate sector is slightly different in that negative local sentiment and slowing of the market is occasionally counterbalanced by foreign buyers looking to purchase here and get maximum value for money,” says Greeff.